Caps on overseas uni students could cost Victorian economy $6 billion

Victoria’s economy could lose nearly $6 billion over three years if international student enrolments at the state’s universities were cut by 30,000 under the federal government’s plan to cap arrivals.

Research commissioned by the University of Melbourne and Monash University found if there were 30,000 fewer foreign enrolments at the state’s eight public universities it could cost the state $5.9 billion and at least 12,000 jobs by 2027.

Universities are concerned about how international student cuts could impact them and the economy.Credit: Wayne Taylor

The analysis, carried out by SPP Consulting, estimated that every international student in Victoria generates an additional $44,000 in benefits to the state on top of their university fees.

The federal government announced in May it would cap international student numbers as a key mechanism in its plan to halve migration to 260,000. A key concern of the Albanese government is the surge in the total number of international students in Australia, which grew 15 per cent to 671,000 over the year to the end of March.

The University of Melbourne’s deputy vice-chancellor Professor Michael Wesley said the cuts would place additional pressure on state and federal budgets.

“The potential loss of income from the proposed caps will place an additional burden on our federal budget, which will in turn impact our state’s budget, and our ability to fund important services and infrastructure for all students,” he said in a statement.

Wesley said Victorian public universities’ contributed $6.7 billion to the state’s gross domestic product in 2023. He urged the federal government to reconsider caps or risk damaging the country’s reputation as a higher education destination.

“What the Australian government is proposing is being interpreted as a major new source of sovereign risk that is spooking prospective students and their parents … Instability from sudden policy changes in visa settings and costs will drive students to study in other countries.”

The report warned that international student fees also prop up funding for vital research and make up half of all externally sourced investment. One-third of international students in Australia choose to study in Victoria.

Limiting their enrolments risked the state economy, vital research and the standing of Victorian universities in Australia’s region, Monash University’s deputy vice-chancellor Professor Craig Jeffrey said.

“Capping international students will deprive the sector of revenue and thereby undermine life-saving medical research. We depend on a flow of brilliant international students for this vital research to be funded and delivered,” Jeffrey said.

But federal Education Minister Jason Clare said the reforms will help set the sector up for the future, ensuring quality, integrity and providing certainty for universities.

“We are consulting leaders from the international education sector to make sure we get the design and implementation of these critical reforms right, with implementation to begin from January 1, 2025,” he said.

Clare added once the legislation passed the aim was to set limits for every university, higher education and vocation provider that teaches an international student.

Education Minister Jason Clare.Credit: Alex Ellinghausen

The Victorian Chamber of Commerce argues the strength and success of the state’s universities shouldn’t be underestimated – and that the impact of reducing international student numbers would impact their viability.

“Businesses rely on the ability to employ international students for employment across many sectors including hospitality and retail. In addition, international students drive inbound tourism,” the body’s chief Paul Guerra said.

Some of the world’s top universities were in Melbourne, and it was a huge competitive advantage for the state, he explained. “My hope is that the federal government reconsiders international student caps to avoid squandering these advantages.”

Earlier this month, the Business Council of Australia chief executive Bran Black said the government’s cap on foreign students could cripple Australia’s higher education sector and deliver a lasting blow to the economy.

“We are concerned the government is about to make the wrong short-term decision by cutting international students, which will have a lasting long-term negative hit to the economy, impacting all Australians,” said Black, who leads the lobby group representing the nation’s major companies.

Victoria’s state opposition said international education was Victoria’s biggest services export and generated $14.8 billion in revenue last year.

“By taking the axe to international education, the federal Labor government will cause long-term damage to Victoria’s economy, drastically slashing revenue and jobs,” state Liberal tertiary education spokeswoman Bridget Vallance said.

The Victorian government has been contacted for comment.

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