More transparency needed on international student caps

The Federal Government's new cap on international students has come at a time of public debate about the impact of migration on housing affordability and availability.

But targeting student migration does not address the many complex challenges Australia faces on housing.  

The Government says the cap will strengthen “the integrity and sustainability” of international education, as well as help manage migration numbers going forward.

Unfortunately, it will also hamper Australia’s fourth largest export. International education, of which tertiary education makes up more than 90 per cent, was worth $48 billion in 2023.

Analysis by the Federal Department of Education does point to the strain recent international student commencements have had on parts of Australia’s rental market, particularly in major urban inner city areas. Noting the analysis does not look at what type of accommodation or where the international students are actually living.

However, the large influx of international students in 2023 is already showing signs of waning.

CEDA analysis of international student data shows that while commencements in tertiary education increased by 7 per cent in the calendar year to July compared with the same period in 2023, commencements of international students enrolling for the first time since being issued a visa fell by 21 per cent.

This suggests that although the number of international student commencements is higher, these students are not all new arrivals – many were already in the country.

Similarly, the number of visas for international tertiary students granted in the 2024 year to August is down 28 per cent on the same period in 2023, and only one per cent higher than in 2019.

Part of this decline could be a response to the range of measures the Government has already introduced in the last year to slow arrivals. This includes doubling fees for student visas and Ministerial Direction 107, which slows the processing of international tertiary education student visas. 

The new fees took effect in July, so they are unlikely to have had a material impact on the current data. They may have an impact going forward.

Ministerial Direction 107 will have influenced the number of visas granted this year. But international student visa lodgements have also declined by 18 per cent in the year to August. These would have been minimally affected by Ministerial Direction 107, which influences the approvals process, not someone’s decision whether to lodge an application.

It seems more likely the major driver of the decline is a return to “normal” levels of student visa applications following a spike in international students in 2023 caused by pent-up demand due to border closures and restrictions during the pandemic.

The overall cap of 270,000 students for 2025 will limit the number of new international students arriving next year, particularly if the strong growth in existing international student new commencements holds steady, as they will be included in the cap.

Regardless, there are many more effective options to alleviate the housing shortage, including through more migration pathways for construction workers, reducing regulatory impediments and zoning restrictions, improving mobility through abolishing stamp duty, and making better use of existing land and housing.

Cap criteria appear opaque

Of more concern than the overall cap, however, is the redistribution of places at individual institutions.

It could prompt students whose preferred institution has filled its quota to switch to competitive overseas markets such as the United States, instead of choosing an alternative in Australia.

Federal Minister for Education Jason Clare has stated the redistribution is about better equity among the universities, limiting new starters at bigger urban universities, while increasing numbers for smaller regional providers.

He also pointed to the existing proportion of international students and the uneven impacts of the COVID-19 pandemic on returning student numbers when setting the limit for each institution.

But while each institution’s International Student Profile outlines its indicative 2025 cap along with international student concentrations, and pre- and post-pandemic commencements, details on how the caps have been calculated have not been published.

Greater clarity is required to provide more certainty to education providers.

For example, in regional Victoria, Federation University’s international student commencements fell by 43 per cent between 2019 and 2023. Its indicative cap for 2025 is a further 52 per cent reduction.

While Federation University does have a relatively high proportion of international student enrolments, some urban universities with a similar concentration, such as Monash University and University of Adelaide, have seen their caps increase significantly on 2023 commencements.

This suggests other factors are being considered when setting the caps.

The Department of Education has committed to publishing further data on the caps in its next release. Until then, the reasoning remains opaque.

Given the importance of international education to the Australian economy, it will be essential to monitor and assess the policy’s impacts and effectiveness, and provide more transparent data.

The caps will have some detrimental impact on the sector. Accordingly, the Government must be willing to revisit the policy if necessary.