How the Coalition fed the university crisis

Peter Dutton could not have been clearer in his budget reply speech in May, linking record numbers of overseas students at Australian universities to the nation’s housing crisis.

“We will reduce excessive numbers of foreign students studying at metropolitan universities to relieve stress on rental markets in our major cities,” he said.

“We will work with universities to set a cap on foreign students.”

It’s a theme Dutton, Coalition immigration spokesperson Dan Tehan, education spokesperson Sarah Henderson and others in the conservative parties have harped on ever since: there are too many overseas students and their number must be capped.

So in the final sitting fortnight of parliament for the year, when the Labor government brought forward legislation to cap overseas student numbers, one might have expected Dutton’s party to wave it through.

Labor’s proposal would have given the education minister unprecedented power to set numbers of overseas students for individual universities. Some, particularly in regional areas, and those that had purpose-built accommodation, would be able to increase their intake, whereas others in the places where the housing crisis was most acute might have their intake cut. The aim was an overall reduction of some 30 per cent in student numbers, starting in 2025.

George Williams, vice-chancellor of Western Sydney University, while less than happy with the plan, expected it to sail through parliament, as did the rest of the tertiary sector.

“Everyone thought it would go through,” he says. “It came as a surprise when the opposition didn’t support it.”

As to why it didn’t, Williams can only suggest Dutton and his colleagues “saw more political upside in opposing than supporting it, about six months out from election”.

Which is to say, the opposition decided there was more to be gained electorally from a continuing crisis than from a solution. This approach has been a hallmark of the Dutton opposition throughout the parliamentary term: railing against the housing crisis and the cost of living et cetera but systematically opposing measures by which the government has sought to address the issues.

This case was particularly cynical, though, because the solution proposed by Labor was so closely aligned to what the opposition had advocated. Also because the high number of international students – and overall record level of net overseas migration – was in the first instance substantially due to the policies of the previous conservative government.

When Australia’s borders reopened after the Covid emergency, the Morrison government “stomped on the student visa accelerator in a way that no government has ever stomped on that accelerator before”, says former Department of Immigration deputy secretary Abul Rizvi.

The former government did this, according to Rizvi and other experts, less out of concern for the tertiary sector than for businesses desperate for workers. Student visas became de facto work visas. Nor was the generosity limited to students. The immigration floodgates were simply thrown open.

Having done this, the Morrison government lost the May 2022 election, leaving it to Labor to get migrant numbers back under control. The new government made little progress. In the year ending June 30, 2023, net migration to Australia was a record 518,000, driven especially by high numbers of international students.

The flow of foreign students was not slowing down, and so, on December 14 last year, without warning or consultation, the Albanese government’s then minister for home affairs, Clare O’Neil, signed ministerial direction 107. O’Neil sold that direction as an “integrity” measure, aimed at ensuring those who came here were genuine students. MD107 prioritised the processing of visas applications from students deemed to be low risk. Really, though, it was about cutting numbers.

It was a spectacular failure, according to most vice-chancellors and policy experts, with grossly inequitable consequences.

In the year following the implementation of MD107, the number of overseas student commencements at the prestigious Group of Eight (Go8) universities – based in the cities where the housing crisis was most acute – grew enormously.

The biggest increase was at UNSW Sydney, up from 11,075 in 2023 to 17,359 in 2024. The University of Sydney was second, growing from 12,790 to 17,247, though the university disputes the Department of Education’s figures, putting the 2024 total of new international students at 14,050. More than 60 per cent of new students at Sydney University and almost 54 per cent at UNSW Sydney this year were from overseas, mostly China.

In percentage terms, overseas commencements were up by double digits for all of the Go8, the biggest increase being a whopping 87 per cent at the University of Western Australia. The sole exception was the Australian National University, where commencements declined by 2 per cent.

A few urban, non-Go8 institutions also gained – among them the University of Technology Sydney and RMIT in Melbourne.

Smaller universities suffered, however. From 2023 to 2024 they lost thousands of students. Commencements in some cases were down 80 per cent.

The contrasting outcomes between the elite universities and the rest, says one regional university vice-chancellor, is largely a function of the countries from which they recruit their students.

Across the Go8, some 70 per cent of international students are Chinese.

“Chinese students are rated as low risk by the visa processing system. They are mostly pretty well off, middle class, there’s little concern about them sliding off and going into the workforce. So under MD107 their visas were prioritised,” the vice-chancellor says.

“If you’re taking more Nepalese, Bangladeshi and other students, that’s been more a problem.”

Another thing about Chinese students, they say, is that they tend to be very selective, and for good reason. A degree from one of the world’s top 100 universities amounts to a “golden ticket” for a Chinese student, enabling them to live in so-called tier one cities – Beijing, Shanghai, Guangzhou and Shenzhen – with privileges including cheaper healthcare and education for them and their family.

“So the Chinese cohort … only wants to go to the world’s top universities. I can’t even compete to recruit Chinese students,” says the regional vice-chancellor.

“MD107 funnelled thousands more students into the Group of Eight and utterly starved the smaller and regional universities. We’ve been absolutely decimated.

“All of the 2023 reports now have been tabled and two thirds of all universities are in deficit, and the regional universities are mostly in severe deficit.”

George Williams agrees the directive led to a “dramatic slowing” in the number of students coming in. “But the evidence shows the big Go8 [universities] have tended to do very well and the regionals very badly, which is the opposite of what the government wants.”

Realising this, the government came up with the Education Services for Overseas Students Amendment (Quality and Integrity) bill 2024, proposing the setting of individual caps for overseas students at all universities.

This split the tertiary sector. The Go8 universities, which were advantaged under MD107, were vehemently opposed to caps, while many smaller and regional institutions came reluctantly to support Labor’s proposed legislation.

It was, says Williams, the “less worse” option, given the education minister, Jason Clare, had warned that if the legislation did not pass, MD107 would remain in force.

Then the Dutton opposition reversed and announced it would not support the proposed legislation.

“Now, we’ve just got the worst option,” says Williams.

“The whole thing is perverse. We have settings at the moment which are driving in the opposite direction of what the government seems to intend.”

Other non-Go8 vice-chancellors have been even more forceful in their expressions of dismay.

“MD107 is a blunt and opaque instrument that has caused financial havoc on Australian higher education and does not serve the nation’s interests,” said Professor Theo Farrell, of La Trobe University, in a statement.

“It has led to a handful of very large metropolitan universities becoming even larger, with some increasing international student numbers by over 40 per cent in one year. At the same time, many smaller universities, mostly in outer metro and regional areas, have suffered catastrophic losses in student numbers, devastating their finances and requiring cuts to courses and services delivered to Australian students.”

He called it an “own goal” for the government. In truth, however, the situation was as much due to the obstructionism of the Coalition parties – as recognised in a delighted response from the elite institutions.

“The Coalition’s decision to oppose the Education Services for Overseas Students Amendment (Quality and Integrity) bill 2024 is a welcome relief for communities, students and staff that would have been adversely affected by the passing of the legislation and have been struggling with the uncertain policy environment,” it said.

The statement quoted Group of Eight chief executive Vicki Thomson: “This outcome puts Australia’s national interest ahead of short-term political posturing and restores certainty.”

Actually, it doesn’t restore certainty at all, unless, as one non-Go8 vice-chancellor bitterly says, that means the certainty “of regional unis being totally done over by the visa processing debacle that now will remain in force”.

Even the Go8, in its media release, acknowledged the need “to have a discussion about how we manage the sector going forward – including timely and fair visa processing procedures for international students …”

In a breathless inversion of reality, the Liberal Party’s shadow education minister, Sarah Henderson, claimed Labor’s proposed caps on overseas students “looked after the big end of town while punishing the regions”.

They did not. MD107 did that, and that directive is still in force because of a stand-off between Labor and the Coalition following the opposition’s blocking of the proposed caps.

Yet the opposition maintains its support for student caps. Just not Labor’s caps.

“If elected, a Dutton Coalition government will take the decisive action needed to reduce migration so that our housing and infrastructure can catch up. This includes a cap which will go further to reduce student numbers than Labor, specifically at major metropolitan unis, to relieve stress on rental markets in our major cities,” said Henderson.

In a November 18 media release, Universities Australia, the peak body for what is now a deeply riven tertiary sector, blamed both sides of politics for the debacle.

“Australia’s universities are again being used as a political football in the migration debate,” Universities Australia chief executive Luke Sheehy said. “It beggars belief that one of our country’s biggest export industries is being treated this badly.”

So long as MD107 remained, universities and the economy would “continue to experience serious financial harm at a time Australia can’t afford such a measure”.

Already it had cost an estimated $4 billion.

“Some universities, particularly those in outer suburban and regional areas where MD107 is being felt most, are on their knees due to the financial impact of this destructive instrument.

“This appears to be lost on both sides of politics as they continue to treat international students as cannon fodder in the political battle over migration and housing,” said the Universities Australia statement.

Which seems like a fair assessment. It was Coalition policy that initially caused the spike in overseas student numbers. It was Labor’s hasty recourse to the clumsy instrument of MD107 that resulted in the cuts falling disproportionately on smaller and regional universities. And it was the Coalition’s decision to block the better alternative of caps – because it preferred continued chaos to a solution – that ensured the directive’s damage continues.

Clearly the current situation is untenable, and change could be imminent, says Phil Honeywood, chief executive of the International Education Association of Australia.

The government, he says, “has listened to the industry and established a stakeholder taskforce, which has been meeting weekly for some months now.

“And the main concern that the international education community has is to ensure equity, to ensure that there’s more fairness in visa processing for different risk level providers.”

Which is to say the government has recognised that the current regime unfairly favours the Go8.

So, what to do? Universities Australia wants MD107 scrapped, but Abul Rizvi, the expert in immigration matters, suggests it could actually be made to work if there was a rethink of the risk factors that currently prefer students from certain countries, notably China, over others, such as India, which has a much higher visa refusal rate.

“Actually MD107 only deals with the order of visa processing. It doesn’t deal with risk ratings. They are a different mechanism, under a different ministerial direction,” he says.

There are five criteria, given various weightings in calculating the risk of each education provider and country under the Simplified Student Visa Framework.

These include the rate of visa cancellations, rate of refusals due to a fraud, the rate of student visa holders becoming unlawful non-citizens and the rate of protection visa applications.

Rizvi reckons the weightings are wrong. Chinese students, for example, actually have a high rate of protection visa applications, but this is given only a 10 per cent weighting. The rate at which students become unlawful non-citizens also attracts a low weighting of just 15 per cent.

“These two criteria are most important but get very little weight. If these two factors were given more weight, Go8 universities would get a very different risk rating because so many Chinese students unsuccessfully apply for asylum.”

In contrast, says Rizvi, “a student visa can be cancelled because the student left Australia without finishing their course or if they finish their course early. That is a poor risk reason.”

He would include other factors not currently considered in determining risk.

“The most important is what happens to students after completing their course. Do they go home? Do they stay on and apply for a temporary graduate visa? Do they get a well-paying skilled job using their skills that enables them to get PR [permanent residency]? Do they end up in immigration limbo?

“Overall, I think risk-rating individual providers in the same sector differently is a key part of the problem.”

No doubt, fixing it would be complicated. And all the more difficult, he says, because of the political clout of the elite universities.

“No one wants to take Sydney University on,” says Rizvi.

The evidence would suggest the issue must be addressed, and soon. Because, as Phil Honeywood says, “Obviously, no government wants to see regional universities fall over, and regional universities rely very heavily on international student revenue.”

The hint from Jason Clare’s office is that change is coming, but is not yet quite “cooked”. Exactly what form it will take is uncertain. The only certainty, it seems, is the opportunistic Dutton opposition will not be party to it. For they see electoral benefit in chaos.

This story was amended on December 8, 2024, to include the University of Sydney’s estimate for the increase in new international student enrolments for the year. 

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