Australia Loses Its Grip On The Foreign-Student Market

> beginning in the early 1980s, Australian governments of all political persuasions gradually reduced the public contribution to higher education from close to 100 percent to less than 40 percent (and at my institution, Macquarie University, only 28 percent).

This is a disingenuous description of how university funding has evolved in Australia.

The Whitlam government abolished university fees in 1974, in an attempt to make university education more accessible to low-SES groups. It did not have the desired effect and placed a large drain on the public purse.

In 1989 the Hawke government introduced the Higher Education Contributions Scheme, or HECS. Under HECS, students pay for part of the cost of their education through low-interest, income-contingent loans.

As a fraction of total university funding, this ostensibly means that the public contribution shrank because HECS increased the total pool, as it was meant to. In practice, all the money still came from the Commonwealth Government, merely with different labels and the expectation that some of it would be recouped from students in future.

However, the HECS system has led to centrally-planned, price-fixed rationing of university places. Each university asks for, and is granted, a certain number of HECS-supported places. If it enrols more than these places it will need to fund them itself. As you can imagine this is inefficient, unresponsive to demand and has led to a disconnection between expenses and income for most universities.

> Universities have replaced the lost income with the fees paid by large numbers of international students. Those students, who are charged whatever the market can bear, subsidize Australian domestic students, whose fees are fixed by the government.

And this is how universities have gotten out of the HECS ghetto. Foreign students pay a market price for their places and universities use the money raised to cross-subsidise domestic students. Without foreign students, most universities would be in dire financial straights.

But the effect has varied. While enrolments have collapsed in many of the larger cities, smaller universities (like my employer, Charles Darwin University) have seen a relative surge of numbers as foreign students enrol in cities considered to be safe.