Centrally planned caps on international student numbers are very misguided

The federal government has announced caps on the numbers of international students.

The watchwords for the Albanese government’s new plan to cap international student numbers are “managed growth”. In the world of organisational euphemisms, which most of us are all too familiar with, it can mean anything but. And in this case it does.

“Managed” refers to the government’s decision to get numbers of international students down by any means necessary, primarily to protect itself from the predictable attempt by Peter Dutton’s Coalition to mount an immigration scare campaign in the coming election.

And, in a bit of Newspeak, “growth” means “shrink in the immediate future”, but this is not acknowledged. The government says only that the new managed system will deliver “sustainable growth over time”.

The means to implement the new plan is legislation to be introduced to Parliament this week that will give two ministers, Education Minister Jason Clare and Skills and Training Minister Brendan O’Connor, unprecedented powers to control the flow of international students into Australia.

Brendan O'Connor

Jason Clare

It is not just control over numbers coming into the country, a power that has always been available because the government controls the issue of student visas.

It is a new power to control the number of international students at each of the 1400 education institutions – universities, TAFEs, private colleges, English schools and high schools – which are registered to enrol international students. And it will give the two ministers further power to control where students will study, whether in the big cities or in regional areas, and what they will study.

It’s not clear whether they will also be able to specify how many students from each country each education provider can enrol.

We can’t be fully sure until we see the bill that goes to Parliament but, from the government statements about the new “managed system” for international education, ministers Clare and O’Connor will be the central planners with their hands on the levers, pulling here, adjusting there, fully confident that they know best.

History tells us how such forms of economic control have worked out in the past. But to be fair to the government we don’t yet know if they plan to go the full Soviet, or will use a more deft, less intrusive, lighter touch. If the latter, it might just work. If the former, expect a central planning disaster.

But this is not the full extent of the ministers’ power grab. Currently most education providers that are not universities have to go to their regulator – TEQSA for higher education and ASQA for vocational education – to get courses for international students accredited. In future this will be power the ministers hold themselves – Clare handling higher education and O’Connor handling VET.

Any way you look at it, it’s an extraordinary decision to take regarding the operation of Australia’s largest services export industry which earned revenue of $48 billion in the past year, provided hundreds of thousands of jobs to Australians, and delivered over half of the nation’s GDP growth in 2023.

The intent is clearly not “best practice” regulation that is there to ensure orderly operation of the market or to ensure that hidden costs are paid for. It is out-and-out market control, premised on the basis that bureaucrats know best about what decisions should be taken by individual economic agents.

There is another leg to the government’s announcement about caps which will clamp down harder on dodgy education providers and agents in the private market. The government would like you to think that boosting integrity and reducing exploitation of international students are key reasons for its plan to economically control the international education market. But the two things are separate. The integrity reforms need to be done. The market control is the part that is highly alarming.

To get to practical details: how does the government plan to gather and analyse the information necessary to make sensible decisions about how many international students each of the 1400 education providers can have, and in which courses?

Australian National University higher education expert Andrew Norton says in his blog: “Because numbers will be allocated between universities and courses according to a politician or bureaucrat’s view of where students should enrol, rather than where students want to enrol, actual enrolments are likely to be well below the capped level.”

Too true. International students coming to Australia have a very clear idea of the type of university they want to study at, and the course they want to do.

Chinese students, driven by university rankings, want a Group of Eight university in a major city. If their only option is their not-first-choice course at a regional university they won’t come.

The government would like students from a broader spread of countries to be coming to Australia. Education providers would too, and they have made major efforts to grow new markets. If the government gave international education a similar level of support to that enjoyed by the much smaller tourist industry, these efforts would be more successful.

Some universities, such as La Trobe, are making welcoming noises about the government’s plan hoping that it will help channel international students toward their regional campuses. Their hopes are unlikely to be fulfilled unless there is a sufficient incentive, that is more than just a government directive.

The government also hopes that its centrally planned approach will be useful in solving big city housing problems. Universities are promised a higher student cap if they provide more student housing. Welcome to another implementation mess.

The political factor driving this is the government’s need to say, pre-election, that migration is under control. But the cost of it could very well be to wreck one of Australia’s economic success stories of the past two decades.

First the government has to pass the bill. There is sure to be a Senate inquiry and much horse trading with Greens and independents in an effort to pass it. At its earliest, it’s not expected to be implemented until next year.

In the meantime, how will education providers know how many international students to recruit and enrol for the 2025 intake? And will they want to come?