International students remain key to inner-city vitality
International students are incredibly valuable to Australia in terms of economic contributions, but also in regards to the social fabric of our communities. The nations international student cohort has grown significantly in recent decades, with State Governments, Federal Governments and private education providers working collectively to grow the industry and capitalise on the downstream economic benefits that they provide.
According to the Department of Education, Skills and Employment the total annual number of international student enrolments in Australia increased by 248% between 2002 and 2019, from 274,890 to 956,776 at an average annual growth rate of 7.6%. It is through this growth that Education has become Australia’s fourth largest export, supporting circa 250,000 jobs nationally at an estimated value of $37.6 Billion to the Australian economy as at the end of the 2018-19 Financial Year.
Source: Australian Government Department of Education, Skills and Employment
For all the challenges it presents, the impending retraction in international student enrolments throughout the country due to Covid-19 induced border closures is one of the most significant economic hurdles that Australia is currently facing. Whilst the total number of international students in Australia has already declined, these declines will soon become much more dramatic. An estimated 80% of Australia’s international university student arrivals were already in the country before the borders had closed ahead of the commencement of semester one 2020. But fast forward to today in late July, with the second semester scheduled to start in less than two weeks and with no easing of international border restrictions, Australian universities are set to see their international student cohort retract significantly.
Modelling completed by the Mitchell Institute in April 2020 suggested that the inability for international students to arrive and commence their courses for the second semester of 2020 would see an estimated $2 Billion in annual tuition fees wiped from the sector. However, the loss to the economy as a whole will be far greater through additional downstream economic benefits that these tuition paying students provide. ABS data shows that for every $1 lost in university tuition fees, there is another $1.15 lost in the broader economy due to international student spending, which would take the total economic loss to $4.3 Billion during for the second semester of 2020 alone.
Further research by the Mitchel Institute utilised university finance and student enrolment data from the Department of Education, Skills and Employment to model two different scenarios of recovery in international student enrolments. One scenario was optimistic and assumed that Australia’s international student intake process could return to normal by the start of 2021 and the other scenario assumed there would be no new international students until 2022. The first scenario would result in a $10 Billion loss to the university sector, whilst the second scenario, which arguably appears more likely to occur, would see a $19 Billion cumulative loss between 2020 and 2023 (when student numbers return to pre Covid-19 conditions).
Source: Universities Australia Student Finances Survey
Aside from the universities themselves, the industries that will be most impacted by the loss of international students will be the Retail and Hospitality industry and the Property industry. Data taken from the Universities Australia Student Finances Survey showed that 36% of student spending is done in the Retail and Hospitality sector, whilst another 36% of their expenses are allocated to property, predominantly through rental payments. Whilst the significant revenue loss is suffice to impact each of these industries as a whole, there will be certain locations that feel the pinch more than others due to the historical concentration of international students living in certain areas. The table below provides a snapshot of the most vulnerable areas of Queensland, in terms of exposure to international student numbers.
*Based on the vacancy rate of the local postcode, according to SQM Research.
Source: Mitchell Institute analysis of ABS data & SQM Research.
Furthermore, in addition to the obvious loss to the economy and challenges facing property markets in terms of enhanced pressure on rental vacancy rates, the fabric of Australian society also stands to be a key loser. International students should never be viewed solely as a source of revenue for the economy, but must be recognised for their collective ability to expand our understandings of international cultures and as opportunities for ongoing and newly created business relationships. Current statistics show that 16% of them will one day become permanent residents of our country; this is expected to increase over time. Their impending absence will thus not only be missed by businesses and landlords, they will be missed by society as a whole.
That being said, with a limited understanding of medical epidemiology (as the vast majority of us do), one can’t help but begin to think of solutions or ways for Australia to keep our doors open to international students during the Covid-19 pandemic. Surely, in Queensland, there is a strong case to be made for university campuses to re-open to students in a Covid Safe manner. At a time when the rules allow for 13,000 people at Suncorp to watch the Broncos be beaten comprehensively every week, when primary and high school students are back at school, when more and more office buildings are welcoming employees back in revised capacities, there must be ways for Queensland universities to welcome students back to campus life. This statement is made with the upmost respect for all medical advice (and Broncos players), but with an honest sense of frustration that the workplace of some of the country’s most intelligent people are yet to find a solution to allowing students to return to an on-campus environment.
At the time of writing, it is understood that NSW and the ACT have provided the Federal Government with pilot plans to welcome international students; whilst the author is unaware of whether the Queensland government is yet to do so. A pilot program to bring 350 students to Canberra from Asia had been developed by the Australian National University and University of Canberra and backed by the Federal and ACT governments, before having to be suspended earlier this month due to the surge in community transmission of Covid-19 in nearby Victoria. Whilst the efforts of these universities and their respective State government is commended, one must wonder what has caused the delays for a pilot program for Queensland, which is much further removed from any of the country’s ‘Covid-19 Hotspots’. Whilst the author is sure it is an incredibly complex task to complete, it is one that is hopefully not being treated as a political football given that the State election is only a few months away.
Tasman Nealon | Property Economist