Inside Labor’s drastic cap on overseas students – and the urgent meeting it’s triggered

Universities will be forced to stop a surge in overseas students and help cut annual migration to 260,000 a year under a federal cap that has sparked fears of drastic intervention that hurts the sector.

The federal plan will require universities and other education providers to slash the growth in overseas student numbers from the 15 per cent increase they recorded last year, under talks aimed at driving that number toward 5 per cent.

The move has triggered an urgent meeting on Monday morning, when four federal ministers will hear from the government’s expert advisory group on international education amid huge concern at the unprecedented idea of a cap on student numbers.

With Opposition Leader Peter Dutton accusing Labor of allowing migration to grow out of control, the government will use the federal budget on Tuesday to assure voters it can halve the net migration intake from 528,000 last year to 260,000 next year.

The Labor budget policy will outline a pathway to lower net migration and challenge the Coalition to reveal what it would do to reduce the intake, setting up a test for Dutton in his budget reply on Thursday night.

‘Sitting ducks’

One education official said the universities were “sitting ducks” for the new policy because the government would find it easier to curb student numbers than to cut migration in other ways, such as by reducing visas for temporary skilled workers, backpackers who work on farms or the family reunion program.

A key factor behind the new agenda is the government’s concern about the surge in overseas students since 2022, leading to a shift in thinking in federal cabinet and a decision to draft a new law with tight controls on the intake.

The draft law will be put to federal parliament this week and will allow Education Minister Jason Clare to set the overseas student intake for every university, an extraordinary power that ends decades of uncapped growth.

Home Affairs Minister Clare O’Neil will join Clare at a meeting on Monday morning with the Council for International Education, along with Skills Minister Brendan O’Connor and Immigration Minister Andrew Giles.

Education Minister Jason Clare.Credit: Alex Ellinghausen

Council convenor Phil Honeywood, chief executive of the International Education Association of Australia, said the federal intervention carried a major risk of policy overreach.

“Every week we’re seeing a new policy announcement in this beleaguered $48 billion industry,” he said on Sunday.

“The sector is crying out for greater transparency and certainty to stop the global messaging that Australia does not want international students.”

Inside the government, however, there are strong concerns that universities have enjoyed surging revenue from overseas students without any responsibility for the broader impact on migration and population.

The government believes the changes will make sure the system serves the national interest rather than being driven by the financial interest of the universities.

The total overseas student population in Australia was 634,000 in September 2019. That slumped to 318,000 in the depths of the pandemic two years later, government figures show, but it has rebounded strongly, and it has also fuelled community concerns about housing shortages and urban congestion.

The total stock grew from 583,000 in March last year to 671,000 in March this year, a growth rate of 15 per cent. Some in the government believe the growth should be reduced to 5 per cent per year, subject to consultation with the university chiefs and others across the sector.

Slower growth in the total student population allows the government to reduce annual migration because the rate of the inflow, rather than the total stock, is crucial to net overseas migration.

University chiefs have pushed back at the Labor agenda by pointing to National Australia Bank estimates that spending by international students made up 0.8 percentage points of the 1.5 per cent increase in gross domestic product last year.

“Our member universities either provide or facilitate access to accommodation that caters for over 83,000 students and we have a substantial forward plan of additional supply across the next decade,” said Group of Eight chief executive Vicki Thomson.

“The framework consultation process will be extremely important as we seek to get the right balance of outcomes for the nation and our international students.”

The government released a draft framework on Saturday to start consultations with the sector, after announcing the plan at 9am that morning.

Universities Australia chief Luke Sheehy emphasised the need for input into the final plan, saying the sector looked forward to working with the government to “co-design” the policy settings.

The draft framework says: “The overwhelming majority of onshore international students study in Sydney, Melbourne and Brisbane (approximately 70 per cent of 2023 enrolments). There is work to be done to alleviate current pressures on accommodation, transport and other infrastructure.”

It also says enrolments did not reflect Australian skill shortages because 35 per cent of international students were in business studies and management and only 8.7 per cent were in health and education.

“More can be done to encourage study in areas of persistent and critical skills shortage such as in teaching and nursing,” it says.

The student cap is central to the broader migration agenda after the government claimed early success in cutting offshore student visa grants to 14,000 in April, in line with the rate before the pandemic and sharply down from 22,000 in the same month last year.

The budget will forecast a cut to net overseas migration from 528,000 last year to 395,000 this year and 260,000 next year, in an ambitious plan to halve the intake.

The goal beyond those years is to return the intake to around 235,000 each year, in line with the trend before the pandemic.

International students are expected to make up 50 per cent of the net overseas migration, the biggest single group, while permanent migrants make up 25 per cent, temporary skilled workers make up 5 per cent and working holiday makers account for 15 per cent.

The government intends to amend the Education Services for Overseas Students Act to give the education minister the power to set limits on enrolments at each education provider, including within specific courses or locations.

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