Melbourne Uni well placed to withstand foreign student caps: S&P Global

The University of Melbourne is in excellent financial shape to shrug off any effects of the federal government’s new caps on international student numbers, according to a respected credit ratings agency.

The university said last week that the caps – which could reduce next year’s intake of foreign students at Melbourne and the country’s other seven top unis by up to 26 per cent – would have a serious impact on its finances and endanger its internationally renowned research program.

The University of Melbourne is in great financial shape and will be able to withstand the new foreign student caps, S&P says.Credit: Penny Stephens

However, rating agency S&P Global said on Monday that Melbourne’s “excellent market position, sound operating performance, abundant financial resources, and manageable debt levels” all pointed to a stable financial position for the university in the coming years, despite the possible effects of the caps.

The ratings agency confirmed its AA+ credit rating for the university, which grew its income to nearly $2.9 billion in 2023, recording a small operating deficit of $71 million, as its wage bill climbed to $1.7 billion.

The university collected more than $900 million – its single biggest source of income – in tuition fees from international students in 2023. Vice chancellor Duncan Maskell said the student caps would leave Melbourne Uni with “inadequate funding to teach and do research”.

However, the S&P analysts concluded that with nearly $12 billion in assets and a low debt profile, the institution is well placed to take the policy shift in its stride.

“Tightening immigration settings and proposed international student caps could crimp growth in tuition fee revenue, but ... UoM [University of Melbourne] management will be able to broadly offset this through cost reductions, as it did during the pandemic-era closure of Australia’s borders,” the agency wrote.

“We expect UoM’s balance sheet to remain very strong.

“The university has ample financial resources that support its financial profile and could be drawn down in a weaker operating environment.”

The ratings agency was less bullish about the finances of another Melbourne university, La Trobe, with S&P downgrading the institution’s credit rating to A+ last week on concerns about its burgeoning debts.

The analysts noted that La Trobe’s total debt nearly doubled to $334 million in 2023, from $197 million in 2022, as the uni spent big on campus infrastructure, including new health teaching facilities, student accommodation and net zero initiatives.

A new clinical teaching building opening in 2026 is also expected to add to La Trobe’s debt and servicing costs, although S&P remains confident that the university’s management can stay on top of the situation, having proved its “financial acumen” by slashing spending in response to the pandemic.

A spokesperson for La Trobe, which is set to benefit from the government’s new policy on international students, said its 2025 enrolment figures were likely to emulate its strong performances in 2019 and 2023.

“We anticipate that this, combined with other areas of growth, will put us on a sound financial footing,” the spokesperson said.

The University of Melbourne declined to comment.

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