International student cap in Australia and its impact on the economy
Author: Tu Weizhi (Research Executive)
Editors: Singaravelan Divyashree (Research Director), Goh Jing En (Vice President (Research & Publicity))
Australia has the second largest international students share in the world, which reached a record size of 700,000 in 2024. The substantial revenue as high as A$36.4 billion (S$31.7 billion) in 2023 places international education as the fourth-largest industry and the third-largest export of the country. (Towell, 2024) International students pay considerably higher tuition fees compared to domestic students, which is particularly crucial as underfunding issues have plagued the entire higher education sector in Australia.
However, Australia has recently introduced the National Planning Level (NPL) to cap on the number of international students via giving each higher education institution a quota for international admission, on top of stricter visa regulations. By significantly reducing the number of international students, the government expects a significant fall in demand for local housing and hence ease the overheating housing market which is characterised by skyrocketing rental and property costs and is one of the most concerning issues for Australians in the upcoming 2025 election year. (Turnbull, 2024) International students tend to have price inelastic demand for rentals due to their high spending capacity and limited supply for campus dormitories. This overstretches the rental market and crowds out the real demand of local Australians. The government also argues that limiting international students will alleviate pressure on the job market and improve employment prospects for local residents especially in metropolises such as Melbourne and Sydney where 91% international students apply for a job at. (Small, 2022)
Critics argue that the housing crisis is much more complex. International students mainly live in purpose-built student accommodation (PBSA) which is not the type of housing sought after by locals. Moreover, international students only make up 7% of the national rental market, which makes it a minority stakeholder in driving up the price. (Gribble, 2017) On the other hand, supply-side policies such as relaxing land use regulations and building more residential houses might be a more effective solution, as the Reserve Bank of Australia estimated that a 1% increase in dwelling stock results in the cost of rentals decreasing by 2.5%.
Another important consideration is its impact on long-term economic growth as education is at stake. International students bring their knowledge and talents into local workforce and hence add vibrancy and diversity to the economy. Restricting international students could make Australia less attractive to global talents and investment, affecting its economic capacity and long term potential growth.
In conclusion, while international students might disrupt the local job and housing market to some extent, the recent policy of capping their numbers introduces significant limitations and risks. Balancing the needs of the domestic population and the benefits of a thriving international education industry requires nuanced and multi-faceted approaches such as a combination of demand and supply-side policies to achieve both sustainable economic growth and social cohesion. International students are not just temporary visitors; they are integral to the fabric of Australia's economic and cultural landscape. Hence, more careful consideration is deserved for formulating a comprehensive international education policy.
References
Karp, Paul; correspondent, Paul Karp Chief political (2024). "New record set for number of international students in Australia". The Guardian.
Towell, Noel (2024). "Uni of Melbourne pauses hiring, claims $85 million hit from international student caps". The Age.
Turnbull, Tiffanie (2024). "Australia introduces cap on international students". BBC.
Jessica, Wong (2024). “New limits on international students are causing turmoil among colleges, universities” CBC News
Gribble, Cate; Rahimi, Mark; Blackmore, Jill (2017). "International Students and Post-study Employment: The Impact of University and Host Community Engagement on the Employment Outcomes of International Students in Australia". International Student Connectedness and Identity. 6: 15–39. doi:10.1007/978-981-10-2601-0_2.
International students and the private rental market: Available data (2024). Department of Education Australia.
Small, Lynlea; McPhail, Ruth; Shaw, Amie (2022). "Graduate employability: the higher education landscape in Australia". Higher Education Research & Development. 41 (3): 919–933. doi:10.1080/07294360.2021.1877623.