Foreign students flocking to Australia, OECD report reveals

‘Very poorly thought through’: As a new OECD report exposes low public spending on Australian universities, a former Treasury secretary has ripped into the Job Ready Graduates scheme.

University of Western Sydney vice-chancellor Professor George Williams says Job Ready Graduates is one of the worst policy decisions of the past two decades Picture: Grant Turner/Mediakoo

Australian universities have the world’s highest concentration of foreign students outside Luxembourg, and one of the lowest levels of government funding, new data reveals.

Direct government expenditure averages $US9415 ($14,270) for every university student – including spending on research and development – well below the OECD average of $US15,102.

Australia spends half as much as Germany per university student, about 50 per cent less than the US and Canada, and 21 per cent less than New Zealand.

“In contrast to most other countries, government expenditure in Australia is lower at tertiary level, including R&D,’’ the report states.

“In Australia … 55.4 per cent of tertiary education funding income … comes from public sources, compared to (the) OECD average of 71.9 per cent.’’

Australia’s share of foreign students is four times greater than the OECD average of 7.4 per cent.

The startling disparities, based on 2022 expenditure, are revealed in the Organisation for Economic Cooperation and Development’s Education at a Glance report, released on Tuesday.

Australia spends twice as much as China per student and 16 per cent more than the UK.

International students account for 27 per cent of enrolments in Australian universities – a bigger share than every other country bar Luxembourg, where half the students are foreigners.

Only 5 per cent of university students in the US come from other countries, compared to 23 per cent in the UK, 21 per cent in Canada and 20 per cent in Switzerland.

In Germany, just 10 per cent of university students are foreigners, in Italy and Japan it’s 5 per cent of enrolments, and in New Zealand 15 per cent.

Federal Education Minister Jason Clare on Tuesday gave details of his needs-based funding change for universities, to start next year.

“Think Gonski for universities,” Mr Clare said, referring to business leader David Gonski’s blueprint to link schools spending to student disadvantage.

“This isn’t a capped program, it’s demand-driven – the money follows the student.

“The more students a university has that meet the criteria, the more funding they will receive.”

Mr Clare said he would legislate next year for a “demand-driven” funding system to start in 2027, guaranteeing a university place for every student eligible to study.

“It doesn’t mean university is free but it does mean if you get the marks for the course, you will get a place at university,’’ he said.

Mr Clare said Indigenous enrolments at university have risen 8 per cent since he introduced a pilot scheme for Aboriginal and Torres Strait Islander students in 2023.

“Over the next 10 years we think it could double the number of Indigenous students at university,” he said.

“The next step is to do the same sort of thing for students from other disadvantaged backgrounds.”

Australian universities’ heavy reliance on revenue from foreigners charged full fees was outlined on Monday at a Senate inquiry into university governance.

University leaders revealed they were cutting costs and jobs, following the Albanese government’s decision to cap total international student enrolments at 270,000 this year, and 295,000 in 2026.

University of Wollongong chancellor Michael Still said the government’s restrictions had cut one in three foreign enrolments, blowing a $35m hole in this year’s budget, necessitating 99 job cuts.

“This financial impact, and the uncertainty surrounding the future of international onshore education at this time, necessitated an immediate and comprehensive review of our operating model,’’ he told the Senate hearing in Sydney.

University of Technology Sydney vice-chancellor Professor Andrew Parfitt said he could have avoided $100m in “heart-wrenching’’ financial cuts over the next 12 months if UTS had been able to enrol an extra 1000 international students this year.

Macquarie University chancellor Martin Parkinson – a former Treasury secretary and head of the Department of Prime Minister and Cabinet – told the hearing that universities must cut costs to remain financially sustainable.

“For five of the last six years, (our) university has been in deficit,’’ Dr Parkinson said.

“If we don’t address these sorts of issues you won’t have a university sector.

Macquarie University chancellor Dr Martin Parkinson warns universities will be left ‘financially crippled’ unless they slash spending.

“You’ll have a series of institutions that are financially crippled because government’s clearly not going to fund any more, and decisions are being taken to reduce international student numbers, and in a strong labour market domestic students have more options than going to university.’’

Dr Parkinson said the Job Ready Graduates scheme was a “very poorly thought-through intervention’’.

JRG, introduced by the former Coalition government, increased public subsidies for degrees required to fill skills shortages, such as nursing, teacher education and mathematics.

But it cut subsidies for popular degrees in law, arts and business, hitting domestic students with higher fees and student debts.

Western Sydney University vice-chancellor George Williams warned that JRG is penalising poorer students.

“In my opinion it’s one of the top five worst public policy mistakes made in the last 20 years in this country,’’ Professor Williams told the inquiry.

“It’s failed to encourage students to change their programs – less than one in 50 will change from a humanities degree to agriculture or from philosophy to maths, it just doesn’t happen.

“But it does dissuade students from going to university, and $50,000 (in fees) for low-income students like we are dealing with is a very significant impediment.’’

The OECD report also shows that 15 per cent of Australian university students drop out after the first year of study, compared to the OECD average of 13 per cent.

“High dropout rates in the first year can signal a mismatch between student expectations and the content or demands of their programs, possibly reflecting a lack of career guidance or insufficient support for new entrants,’’ the report states.