Australian investment in education: Higher education

This report analyses the funding trends of Australia's university sector and includes modelling of the impact on international student revenue of COVID-19.
Friday 17 April 2020

This report analyses the funding trends of Australia's university sector over the past decade. It is published as Australia’s higher education sector faces an unprecedented set of challenges due to the impact of the coronavirus (COVID-19) pandemic.

The report includes modelling of the projected impact on international student revenue of Australia's border being closed in response to the COVID-19 pandemic. 

The report key findings

Modelling suggests that Australia’s universities face a cumulative loss of between $10 billion to $19 billion from 2020-2023 because of the collapse in international student revenue.

The COVID-19 response also impacts on future domestic student demand. It is important to change current policy settings to increase capacity across the tertiary sector.

Before the impact of COVID-19, Australia’s investment in higher education had increased 43.6% in real terms between 2008 and 2018. 

The increase in investment in the higher education sector was driven by the large increase in international student revenue and the introduction of demand driven funding for universities.

Despite increases over the past decade, funding for domestic students has plateaued and participation rates for domestic students in higher education are decreasing for the first time in over 10 years.

Between 2008 and 2018, international student numbers increased by 57.9% while international student revenue increased in real terms by 137%. This suggests that higher education providers were able to enrol more international students and charge them higher fees.

Increases in revenue associated with domestic students are closely aligned to participation. Between 2008 and 2018 there was an increase of 37.5% in full time
equivalent domestic students, and an increase in revenue of 43.2% for the same cohort.

While the introduction of demand driven funding meant that the Australian Government increased its investment in education provision at universities, a large proportion of this increase will be repaid through income contingent loans.

Despite the overall increase in revenue, universities are not reporting larger surpluses than previously. If anything, university surpluses are trending downwards.

Growth in revenue has been uneven. “Mid-ranked” universities have benefited most from demand driven funding whereas Go8 universities have benefited most from the increase in international student revenue.

Smaller universities have not grown at the same rate as larger universities. The reasons for this have little to do with quality as many of these universities score highly on quality indicators.