Long hard yards ahead for Australia’s university sector

While speaking at the Australian Financial Review’s Higher Education Summit 2021, Australia’s minister for education, Alan Tudge, said “even if international students roared back in 2022, the impact of the massive decline in commencing students (36.5% since June 2019) will still be felt for several years”.

“The greatest initial impact of the Covid-19 pandemic on the university sector was actually from reduced earnings on investments, due to weak global equity markets, rather than a reduction of international students,” Tudge continued.  

He also said that, “the majority of universities entered this calendar year in a relatively strong financial position”. 

Although case numbers in the country are relatively low, the prime minister has said that the country will stick to its lockdown strategy until 70% of citizens are vaccinated. The country recorded 914 new cases on Sunday, and New South Wales, Victoria and the Australian Capital Territory are under a lockdown.

“You can’t live with lockdowns forever and at some point, you need to make that gear change, and that is done at 70%,” Scott Morrison said.

Many of the university and peak body leaders participating in the summit said that the relative strong financials of universities were due to savings generated as a result of involuntary staff redundancies, stalling of capital works, and hard measures on spending.

Universities Australia chief executive, Catriona Jackson, while speaking to The PIE, said, “All our universities continue to take significant revenue hits due to Covid-19.

Australia has not funded its universities at the appropriate OECD nations’ average levels”

It is important to recognise that the challenges facing the sector are not single year problems.

With commencements down by a third, and border closures and lockdowns continuing to affect many sectors of the Australian economy, the consequences for the higher education sector will be severe and prolonged over many years to come.

Australian universities lost an estimated $1.8 billion in revenue in 2020, and we predict at least another $2bn will be lost next year.” 

Phil Honeywood, CEO of the International Education Association of Australia said “for many years now” there has been an unspoken understanding between successive Labor and coalition federal governments and our universities.

“This has involved governments not questioning the number of full fee paying international students enrolled by our education institutions provided that not too much pressure was applied by universities for additional capital works and recurrent public funding,” he told The PIE.

“As a consequence, on any number of globally benchmarked financial analyses, Australia has not funded its universities at the appropriate OECD nations’ average levels.”

The Group of Eight CEO, Vicki Thomson also called out Australian universities’ “distorted funding model, which was not sustainable”, as it relies overwhelmingly on international students and not enough on public funding for research and towards offsetting domestic student fee.

Catherine Livingstone, the chancellor of the University of Technology Sydney, said that now may be a good time for universities to understand their own costing structures better. 

“Developing consistent methodologies for understanding our cost structures would be a very helpful thing that the sector could do going forward,” she said.

While speaking to The PIE, a University of Melbourne spokesperson pointed out the University’s concerns.

“The University remains severely challenged financially and continues to operate under conditions of extreme uncertainty. However, throughout the pandemic, we have provided critical financial support to our students to enable them to continue their studies,” they said.

Being at the mercy of external forces means that it is likely that we will face more challenges”

“The next two or three years will absolutely depend on the numbers of international students enrolling, decisions by the commonwealth government, and other externalities. Being at the mercy of external forces means that it is likely that we will face more challenges.” 

Tudge highlighted the government’s multiple funding support to the sector since last year, at the AFR summit.

Peter Høj, the vice chancellor of Adelaide University called for the $1 billion emergency grant for universities, announced in the 2020 budget, to be made permanent, until universities are able to come out of the funding crisis, which is expected to take several years. 

On an optimistic note though, Thomson at GO8, said, “Our universities have been around for tens and hundreds of years… they have withstood fire, famine, and flood. They would withstand Covid-19 also, albeit with a few changes that they might have to adopt… we have some hard yards to cover in the next two to three years to come back stronger on the other side.”  

Australia is also waiting for 70% of its population to get fully vaccinated before permitting phased return of international students. Tudge said the the government was still planning to kick start the NSW and South Australia pilots for international students, once the current Covid-19 surge in the country subsided.

He said he was “confident that students will return in significant numbers”, once the borders re-opened.

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