Universities warn of 'significant' job cuts as international student caps threaten business model - ABC News

Topic:Higher Education

International students come to Australia pursuing a cap and gown, but it is a different kind of cap causing the universities major concern. (Reuters: Patrick T. Fallon)

Global ratings agency S&P estimates the government's plan to cap new international student enrolments will cost universities hundreds of millions of dollars in revenue next year but the impact will be uneven across the sector.

Western Sydney University uses 24 cents from every dollar an international student pays to subsides domestic students and other programs.

The cap is expected to be legislated by the end of the year. The Department of Education says 15 public universities will have international student numbers cut but the majority will be able to enrol the same number or more.

More than 1,000 workers could soon lose their jobs as Australia's universities aggressively cut costs ahead of the federal government's proposed international student caps, which are expected to take effect next year.

The restrictions will have a significant impact on the budgets of universities, given their strong dependence on overseas student fees, with credit ratings agency S&P Global estimating it will cost them several hundred million dollars in revenue in 2025.

Earlier this month, the Australian National University (ANU) vice-chancellor Genevieve Bell sent an email to staff, warning: "The financial challenge we are facing is real and substantial."

The ANU is projecting a deficit of more than $200 million this year, well above its expected shortfall of $60 million.

It has also been spending more than it earns for years, recording a deficit of more than $400 million between 2020 and 2023.

The international education market is big business, particularly in Australia. As the government moves forward with the most significant crackdown on the sector in decades, we take a look at just how massive the industry really is.

Professor Bell said it was therefore necessary to slash operational costs by $250 million, with the vast bulk of it to come from job losses and wage reductions.

While the vice-chancellor said she would take a 10 per cent pay cut, which would lower her salary to $1.15 million, she also asked staff to forego their 2.5 per cent pay rise (due to commence in December) in order to "save jobs".

However, hundreds of ANU staff have already been called into meetings to be informed their future employment is looking uncertain.

The university blames its financial situation on "changes in government policy [and] the management of international student numbers", though the National Tertiary Education Union accuses ANU of "poor governance and financial mismanagement".

The union estimates there will be more than 600 job cuts at ANU and it is currently locked in heated discussions with management, even going as far as calling for university chancellor Julie Bishop to resign.

The government's plan to impose a cap of 145,000 new international students at public universities in 2024 is expected to be legislated by the end of this year.

It will effectively take the level of new international enrolments back to 2023 levels.

Fifteen public universities are set to have their international student numbers slashed, while the majority will be able to enrol the same number or more, according to the indicative caps published by the Department of Education.

"For the prestigious, inner-city sandstone universities like the Group of Eight, they will lose something like 28 per cent of new international enrolments relative to 2024 [levels]," said Martin Foo, a director and lead analyst at S&P Global.

"Some regional and rural universities could see an uplift in new international enrolments by something like 70 or 80 per cent, so the impact will be highly uneven."

Universities across the nation are also facing similar cost pressures to ANU.

The University of Canberra has revealed it will sack at least 200 staff as part of an "urgent and significant" overhaul to save $50 million in ongoing expenditure.

The University of Wollongong, meanwhile, has flagged a $35 million drop in revenue, which the union believes will lead to 200-300 teaching and research jobs being culled.

James Cook University in Townsville said it would reduce its headcount by about 50 workers, while the University of Southern Queensland will cut an estimated 60 jobs to fill a $32 million budget hole.

The University of Sydney, where international students make up almost half of its cohort, has said there will be hiring freezes and other cost-cutting measures due to the international student caps.

Despite the significant impact of these caps on international student revenue, Mr Foo says Australian universities "will be able to ride out this storm from a credit perspective".

Martin Foo is the S&P Global Ratings director. (ABC News: Richard Sydenham)

"When you look at the university sector as a whole, they have something like $31 billion of cash and financial investments on their books and only about $7 billion of debt so they do have a lot of surplus liquidity to ride out the storm," he said.

Overall, S&P has given very high credit ratings (A+ and AA+) to Australia's top universities, including the University of Melbourne, ANU and the University of New South Wales.

"It enables universities to borrow relatively cheaply in global bond markets," Mr Foo said.

"The proposed international student caps will be a credit negative, but we are waiting to see how university management teams respond to these caps.

"If they are able to reduce expenses on things like consultants, contractors, capital expenditure and staff headcount to a point where they're still able to balance the books, then we're reasonably comfortable with the credit ratings where they stand."

The vice-chancellor of Western Sydney University, George Williams, is concerned the caps will have a major impact on his students.

"What it will do in terms of the bottom line is it's a loss of about $80 million over three years," he said.

George Williams says the students caps will impact the number of graduates required for key sectors such as health. (ABC News: John Gunn)

"Twenty-four cents in every dollar that an international student pays, we use to subsidise our domestic students and other programs."

He said those programs include Western Pantry, a service that provides free food to WSU students experiencing financial difficulty.

"Unfortunately, student caps are very far from the solution. What it means is we'll be taking fewer international students who want to study nursing, and these are students we desperately need," Professor Williams said.

"We don't have enough domestic students studying nursing and sadly you'll be able to draw a bright, clear line between this policy and a decline in health care in Western Sydney as increasingly we run out of people in aged care, pathology hospitals and the like that we need in the future years."

Professor Williams, believes the "deep problems" of universities relying too heavily on international student fees stem from a lack of domestic funding over the past few decades.

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"Universities have had to be lean, efficient and focused on markets that will generate revenue because we've seen such a massive decline in government revenue.

"It's actually very hard to educate domestic students with government funding to the level that our community would expect."

The head of WSU also told ABC News that he had serious concerns about the direction of Australian universities, which have been criticised for being run like profit-focused businesses.

"I think it's fair to say that the community thinks we've lost our way and are focused on the wrong things.

"We're a public sector body and our success should be measured in the public good that we bring to our community and students."

"So, for me, I think it's about reconnecting with the basics, the fact that we're here for our students and community.

"Dollars and the like absolutely matter because they help us complete that mission but it's not the reason we exist."

The aggressive pursuit of international student revenue has led to universities increasingly enrolling students with poor English language skills, which has led to a serious decline in teaching quality, according to higher education commentator Salvatore Babones.

Salvatore Babones is an associate professor at the University of Sydney. (ABC News: Billy Cooper)

"We have entire degrees where international students are almost 100 per cent of the cohort," he said.

"It's simply reached the point where it's almost comical, the ridiculousness of the never-ending quest for additional international student revenue."

Dr Babones, who teaches sociology at the University of Sydney, says this has led to some lectures being "dumbed down".

"To put this in perspective, I have large numbers of students in my lectures who literally sit with a tablet open to a translation app so that they can watch my lecture in simultaneous translation.

"I have students who don't attend class because they can get the transcript translated, instead of having to watch the lecture live.

"I discover repeated attempts of papers that have been written in a foreign language, almost always Chinese, and simply translated into English using an app.

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"These aren't occasional occurrences. This is now the dominant mode of education at some of Australia's most prestigious universities."

However, he believes there has been "no substantial decline" in Australian government funding for public universities, at least on a "per-student basis".

"That's a big myth. There has been a relatively stagnant level of per-student funding from the government. And the universities' ambitions have risen beyond what they were 20-30 years ago.

"Back then, Australian universities were satisfied to be competent and considered solid research universities … but now they want to be in the global top 100.

"Government funding is not adequate to put more than one or two Australian universities in the global top 100.

"Getting there requires a massive infusion of cash, and today that cash comes from international and mainly Chinese students."

Like many, he does not see the business model of over-reliance on overseas students changing any time soon.