‘Worst to come’ for Australian university finances, warns minister

Australia’s government has acknowledged that the worst is yet to come for universities facing the loss of international students because of Covid-induced border closures.

But education minister Alan Tudge says universities’ finances have weathered the pandemic “relatively” well, partly because of federal government assistance.

Addressing the Australian Financial Review Higher Education Summit, Mr Tudge said the number of new international students had crashed 36.5 per cent since the 2019 peak. While flows of crucial Chinese students had rebounded 9.5 per cent since last year, commencements from the other two top source markets – India and Nepal – had plummeted by 55 per cent and 40 per cent respectively.

“Even if international students roar back in 2022…we’re still going to see the financial impact for several years,” he said. “In some respects, the next couple of years will be financially more difficult than even this calendar year has been.”

But Mr Tudge said universities were still in a “relatively strong position”, with 25 notching surpluses in 2020 – including five that had achieved their strongest financial buffers in half a decade. While 17 institutions had recorded deficits, 10 were in the black by more than A$30 million (£16 million).

He said the sector’s net assets had increased by 2 per cent in 2020, with “liquid assets” such as cash and investments growing by 9.9 per cent. The biggest hit to universities’ finances so far had come from investment earnings, with “weak global equity markets” accounting for A$1.3 billion of the A$1.8 billion the sector lost last year.

The financial situation was better than most had expected, in part because of federal government support, Mr Tudge said. He cited the government’s guarantee of domestic teaching grants in 2020, funding provisions for short online courses and an extra A$1 billion in research funding this year, while regulatory flexibility – particularly around visa conditions – had helped universities maintain contact with their overseas students.

He conceded that universities’ failure to attract JobKeeper employment subsidies during the pandemic had been a “sticking point” in the sector, but insisted that universities had not been “prohibited” from the scheme.  

“The government simply put in place rules that were specific to universities because universities are majority funded by the taxpayer and have longer revenue patterns than the month-to-month of most businesses.”

Andrew Norton, professor in the practice of higher education at the Australian National University, said universities had not given the government enough credit for its support. “The sector probably hasn’t played its hand terribly well,” Professor Norton said.

“There are still a lot of people complaining bitterly about JobKeeper, which is closed to everyone at this stage, and really not giving the government any credit for the money it did spend.”

But Group of Eight chief executive Vicki Thomson said the “fault lines” in government support for universities had been apparent long before the pandemic. She said direct federal government funding had comprised just 30 per cent of her members’ revenue, with international students providing a similar share.

“That was never going to be a sustainable model, and that has been laid bare by Covid,” she said. “Our funding model has been distorted for many, many years.”

University of Melbourne vice-chancellor Duncan Maskell said the sense of crisis in the sector was palpable. “I’ve been feeling the pressure. My staff have been feeling the pressure. Many of my staff are utterly exhausted.”

Professor Maskell said his university had managed a “break even” financial result last year “because we made massive savings”, and expected to do so again this year because of the additional injection in research funding.

“What’s going to happen next year? Without another injection of government money, and with the projections we also have on our enrolments, we’re going to be in the red in 2022, 2023 [and] 2024. It’s not quite as dramatic a cliff edge as we thought we were going to hit, but if nothing’s done for us we will be seriously in the red for three or four years to come.”

University of Technology Sydney chancellor Catherine Livingstone, a former CEO of biotech Cochlear, said the “real tension” was that the government, universities and business had failed to achieve “a meeting of the minds” about higher education’s role and purpose.

She said the pandemic had provided a good opportunity “to stand back and have [the] conversation we need to have…deciding what you want to do, and then working out how you want to fund it”.

john.ross@timeshighereducation.com