Foreign student cap will ‘devastate’ Victorian economy: Pallas

The Victorian treasurer says the federal government’s deep cuts to international university student numbers will devastate his state’s economy from next year.

Tim Pallas called on the Albanese government to reconsider the reforms and warned the move to cap enrolment numbers could have unintended consequences.

The University of Melbourne says the deep cuts to the intakes of top universities would cause lasting damage.Credit: Penny Stephens

“A cap on international students is a cap on economic growth. These caps will devastate our state’s economy, lead to skills shortages, and cost us thousands of jobs,” he said late on Tuesday.

Federal Education Minister Jason Clare is seeking to limit the number of foreigners starting their studies in Australia next year to 270,000, with the big city universities and private colleges told to slash their international student intake.

The cap, revealed on Tuesday, means about 53,000 fewer new overseas students will be accepted in 2025 compared with 2023 – a 16 per cent cut – as the federal government responds to political pressure to reduce overall migration numbers.

Smaller and regional universities welcomed the changes on Tuesday, with their intake numbers likely to remain unchanged or grow slightly.

However, the University of Melbourne said the deep cuts to the intakes of top universities would cause lasting damage to the nation.

Pallas, who is also the minister for economic growth, said Victoria held about 30 per cent of the national market share of international student enrolments. Education is the state’s largest export, generating $14.8 billion in revenue in 2023 and supporting about 63,000 local jobs.

He said that was all in peril, citing independent analysis prepared by SPP Consulting that found by 2027 the caps could cost Victoria 12,000 jobs and $5.9 billion, risking the state’s ability to tackle local skills shortages and damaging its international education standing.

“The Commonwealth government needs to go back to the drawing board and better consult the state and the sector before it’s too late,” he said.

Treasurer Tim Pallas says the federal government needs to do a better job at consulting the states and the higher education sector.Credit: Joe Armao

While key details of the plan are yet to be disclosed, Melbourne University and Monash University look set to cop big reductions in new overseas enrolments in 2025, according to sources in the sector familiar with enrolment data at the big unis but unwilling to speak publicly.

Other leaders across Australia’s $48 billion international education market – Sydney University, The Australian National University and UNSW – are expected to suffer the same fate.

Clare said on Tuesday that the 270,000 cap – across the entire tertiary sector – would keep numbers on par with pre-COVID levels.

The vocational sector will be the hardest hit, with a limit of 95,000 new overseas students – 40,000 fewer than in 2023. New international enrolments at private universities will be capped at 30,000 students, a cut of 28 per cent.

However, while the 145,000 new foreign students permitted to attend the nation’s publicly funded universities is a cut of just 1 per cent on 2023 levels, the wealthy group of eight institutions – including Melbourne and Monash – will bear the brunt of those reductions, losing up to 26 per cent of new overseas enrolments next year.

Under the plan, universities with the highest concentration of international students – more than 37 per cent of the total cohort – would lose 50 per cent of whatever growth in overseas enrolments they had generated since 2019.

Melbourne University, with its 21,000 overseas students – 41 per cent of the total student body – is heavily reliant on the fees paid by internationals. At Monash University, its 22,000 overseas enrolments are about 39 per cent of its full cohort.

Melbourne University vice chancellor Duncan Maskell said he learnt the details of the cap when Clare – who must still get legislation for his changes through parliament – was addressing the media on Tuesday morning.

He said the university remained “strongly opposed” to the cap.

“One of the first things we will have to do is seek clarity from the government about the complex methodology that was used to inform their figures,” Maskell said in a statement.

“This methodology was never discussed with us and there has been no consultation process.

“The cap on international students will have detrimental consequences for our university, the higher education sector generally, and the nation for years to come.”

Monash published a statement on Tuesday night saying it too was “working to understand the rationale” driving the changes the government was seeking to impose.

Smaller universities with campuses outside the big cities – where the government wants to send more overseas students – were upbeat on Tuesday. Some were happy to publicly disclose the caps they had been assigned.

Deakin University vice chancellor Iain Martin told staff that the proposed cap gave administrators greater confidence to plan. It will be permitted to enrol 5800 new international students in 2025 – a cap similar to its 2023 numbers.

In a letter to staff seen by The Age, Martin said some international students – including research students – had been excluded from the cap and would not count toward the 5800 figure.

He said the total number was “broadly in line with financial and operational plans for 2025”.

A La Trobe University spokesperson said its “indicative” 2025 allocations were similar to the 2019 and 2023 levels.

Neither Victoria University nor RMIT University provided information on international enrolments when contacted by The Age.

RMIT vice chancellor Alec Cameron said his university had been told what the cap would be and would review it in more detail.

A Victoria University spokesperson said they were looking closely at what had been proposed. Swinburne University said it welcomed “the clarity the announcement provides the sector.”

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