The ecstasy over the Australian Universities Accord has waned rapidly due to several government policy controversies such as the cap on international student enrolments, a managed growth funding system and needs-based funding for students from disadvantaged backgrounds.
These are likely to impact considerably on the ability of universities to undertake their core mission: to educate those who seek to further their studies, and to deliver benefits to the state, civil society, market and communities and jurisdictions in which universities serve and operate.
Consider the impact of the international student cap in Australian universities. In its first year of implementation, it is likely to cost universities between AU$650 million (US$428 million) and AU$750 million (US$494 million) in tuition fees.
In turn, it may mean thousands of jobs could disappear, eroding universities’ research endeavours and provision of support services to students, and even impacting building maintenance and infrastructure projects.
To say that the cap on international student enrolments will not impact universities and wider society is a fallacy. The glory of reputation has been a key lever to bolster universities’ finances, and the reputational damage has been done. It will be felt next year when the global rankings come out.
Operating deficits
Prior to the pandemic, the number of Australian universities that reported net operating deficits were few.
Recently, I retrieved the annual reports of all universities for 2023 and checked their financial statements. Out of 41 universities, 27 reported a deficit. This is the second consecutive year when a record number of institutions reported a deficit. In 2022, 27 universities also reported a deficit.
One may argue that these deficits have occurred by design to maintain existing staffing levels and finance universities’ operations, with a view to returning to pre-pandemic levels regarding international students.
Several Australian universities are likely to continue to report underlying operating deficits over the next few years.
As of the end of October, several universities have announced plans to restructure, offer redundancies or cut jobs due to increasing costs, weak domestic demand for study and the cap on international students.
A weaker economy
This year, one of the major concerns that has been raised by many of us is how we can best equip our university leaders and governors to make informed decisions about the direction and path to follow moving forward. This is particularly due to the externalities and strong headwinds that have hindered the sector’s growth.
We grew up accustomed to economic stability, with the added societal benefits derived from it, and uncertainty is unsettling. In the six decades between 1960 and 2019, Australia only had 14 quarters of negative economic growth. For 28 consecutive years Australia’s economy grew quarter after quarter.
The pandemic changed everything. In 2020, we experienced two consecutive quarters of negative growth and another one in the September 2021 quarter. For the past 11 quarters the Australian economy has grown, although at a weaker rate since the ‘recession we had to have’ back in 1991.
Lower enrolments
As we have already seen, there are fewer domestic students enrolling at university. For a third consecutive year, domestic commencement enrolments decreased; fewer students are also returning to study.
Months ago, I noted that the domestic commencing student cohort was expected to rise moderately to 2030, and the latest statistics published by the Australian Department of Education reaffirm this view.
University students are taking longer to complete their studies. In turn, that means that universities must improve their ability to provide student support and give them the agency and recognition they deserve. Students are more than a number and a record to process.
The provision of enhanced support must be targeted, particularly at those from disadvantaged backgrounds and specific disciplines. This is key for making our universities humane again and continuing their vital role in the functioning of society.
Rise in unemployment rate
Australia’s unemployment rate is also on the rise. We can expect universities to report fewer graduates in employment once the 2024 Graduate Outcomes Survey results are out. This consequently makes addressing Australia’s skill deficits much harder.
The much-discussed need to diversify student recruitment markets is a long-term solution, as it takes years to enter new markets, and success is not guaranteed due to trade barriers and other kinds of regulatory obstacles.
Australia is geographically situated in a region which has become the epicentre of global education activity. Its continued reliance on key markets from countries in Asia will remain. Countries which were previously importers of educational services have strengthened their national systems of education and are now exporters too. So, there is lots of competition to attract international students.
Furthermore, national governments are shifting away from globalisation and embracing more nativist or regional approaches. A university’s ability to increase international revenue is therefore limited.
And finally, let us not forget that reduced revenue from international students means fewer resources dedicated to research endeavours.
We are seeing a decrease in the scholarly output being produced by researchers from Australian universities compared to the pattern seen in past years. Fortunately, our researchers’ work continues to be cited, being recognised as top quality, influential and impactful. We might run out of steam if we let our guard down, however.
The lost decade?
All these things point towards Australian universities facing uncertainty over the next few years. In February, I observed that the outlook for higher education for Australians was bleak.
Currently, it feels like the financial recovery for universities is years away, and as a result this may be Australia’s lost decade for higher education.
Our universities’ governance frameworks were constructed in a period of economic stability. Policy-makers, regulators, university leadership and governance will be tested through this period of uncertainty.
A decision will need to be made if we want our universities to continue to be pivotal institutions when it comes to the functioning of society.
Global resonance
Australia is not alone in experiencing a downturn in enrolments and a loss of trust in universities. It is a phenomenon in many liberal economies. For example, Canadian universities are also being asked to reduce the number of international student visas they apply for as there is rising discontent among the wider public.
In the United Kingdom, universities were warned about their reliance on international students, and a loss of trust in institutions means many English universities are now facing a ‘material risk of closure’ unless they cut their costs or merge.
In the United States, confidence in colleges and universities has reached an-all time low, despite evidence to suggest that higher education produces better outcomes for individuals.
For several years, opinion polls and studies have demonstrated that the value of holding a university degree has been eroded, driven in part by a greater share of the population having a university education and fewer graduates having meaningful employment.
The latest enrolment figures published by UNESCO indicate that there were fewer enrolments in tertiary education in North America and Western Europe in 2023 compared to 2022. Globally, annual enrolments growth is now lower than annual growth rates observed between 2000 and 2014.
Back to basics
Before the current obsession with performance measurements, universities reported how they were engaged and partnered with their community and how they were making a concrete difference. Universities are now focused too much on policy advocacy and attempting to pander to market forces.
If we want our universities to remain relevant and, most importantly, to retain their social contract, we need to get back to basics: being active participants in the community and advocating for the community our universities serve and where they operate.
We need to better articulate how universities make a difference in society, in particular places, through meaningful lifelong learning; the importance of research that aims to solve the key challenges of our era; and highlight operations and stewardship initiatives that have civic engagement at their heart. Universities need to make the ‘third’ mission a key pillar of what they do.
We also need to develop governance and quality assurance frameworks to equip our leaders to tackle turbulence and conflicting externalities in uncertain circumstances.
Angel J Calderon is director of strategic insights at RMIT University, Australia. An earlier version of this article was published in Future Campus.
