Universities lost $850m in 2022 as financial market downturn hits results

Universities are swimming in a river of red ink as the impact of the financial market downturn hits their 2022 bottom-line results.

The University of Queensland lost $311m in 2022. Picture: David Clark

Universities are swimming in a river of red ink following the financial market downturn, and the nine institutions that have disclosed 2022 results so far have ­recorded a combined operating deficit of nearly $850m.

In 2021, those same nine universities posted a combined surplus of $1.75bn, a deterioration of $2.6bn in just a year.

So far, fewer than a quarter of Australia’s 38 public universities – the seven Queensland public universities plus the University of Melbourne and Monash University – have revealed their 2022 operating results. But of the nine, only the University of the Sunshine Coast recorded a surplus.

Other factors that hit university budgets last year include lower than expected student numbers – with many potential domestic students deciding to forgo study to find work in the overheated job market – and the weak, Covid-­affected international student market which was a particular problem at less-attractive, lower-tier universities.

Universities are also now being hit by rising inflation and wage demands from staff, as well as a funding system that compensates in arrears for inflation costs.

Of the nine institutions, Group of Eight member the University of Queensland posted the largest operating deficit of $310.8m, driven by investment losses of $209.3m in 2022, compared to investment gains of $212.2m in 2021.

The university’s annual report said that one of its main long-term investment funds recorded negative returns of 19 per cent in 2022, 33 per cent below target.

UQ also felt the loss of a one-off 2021 federal government research grant worth about $100m and, overall, its operating result deteriorated by more than $650m between 2021 to 2022.

Accounting standards state that universities must record unrealised investment gains and losses as revenue and expenses, which means all universities with large investment portfolios – including the elite Go8 – will feel the impact of the 2022 market downturn.

Two other Go8 institutions, the University of Melbourne and ­Monash University, have also disclosed their 2022 operating result and, like UQ, suffered a big hit.

The University of Melbourne’s $312m investment gains in 2021 turned into losses of a similar magnitude in 2022. Vice-chancellor Duncan Maskell told staff last month that the university’s 2022 operating deficit was $203m, down from a $584m surplus in 2021.

Monash University followed a similar trajectory with a $78.3m operating deficit last year, down from a $410.6m surplus in 2021. Both Melbourne and Monash expect to post another deficit in 2023.

The Queensland University of Technology said its 2022 operating deficit was $134m, down from a $161.9m surplus in 2021. Unlike the other Queensland universities, the QUT annual report has not yet been tabled, but vice-chancellor Margaret Sheil has told staff the university’s financial outlook this year is “similarly challenging”.

Operating deficits were also posted by Griffith University ($69.7m), James Cook University ($44.9m), and the University of Southern Queensland ($15.5m).

Most universities that are in deficit will find their situation challenging, but not impossible, to deal with because the 2022 deficit follows surpluses in earlier years, even in 2020 when institutions made major cuts to staff and research programs to offset the impact of Covid shutdowns.

However Central Queensland University is in the most difficulty because its 2022 operating deficit of $24.3m follows on from a 2021 deficit of $21.8m and a 2020 deficit of $34.4m.