Why international student visa numbers must be curbed

There is widespread awareness that overseas students are a large and growing presence in Australia.

But few observers would know that by 2017-18 overseas students were the largest contributor to Australia’s very high level of Net Overseas Migration (NOM). According to Australian Bureau of Statistics (ABS) estimates, overseas students comprised 104,987 of the overall level of NOM of 236,733 in 2017-18 (Table 1). That’s 44 per cent of total NOM.

Overseas students holding higher education visas were the dominant source of this contribution to NOM. (See definition of NOM on pp. 1-2.)

Nor would many observers be aware that, over the six years from 2011-12 to 2017-18, overseas students were by far the largest growth point in Australia’s NOM. Their contribution increased from 25,700 in 2011-12 to 104,987 in 2017-18 (Table 2).

In the absence of the increasing contribution of overseas students, Australia’s NOM would have declined to around 150,000. Reductions in NOM over these years from New Zealanders and those on temporary work visas (among others – see Table 2) were swamped by the rising tide of overseas students.

The student share of NOM in 2017-18 of 104,987 was far greater than that attributable to movements of those holding permanent residence visas – which was 68,850 in 2017-18 (see Table 1).

Yet almost all the recent debate about the size of NOM and the Coalition government’s proposals to deal with the scale of NOM has focussed on the permanent resident component. The Coalition plans to reduce the impact on Sydney and Melbourne by diverting some who obtain permanent visas to regional areas.

The far more important size of the overseas student component has barely rated a mention in this debate, either by the Australian government or commentators on the migration issue. Nor are many commentators aware that overseas students are by far the largest contributors to population growth in inner Sydney and Melbourne (pp. 18-19).

Part of the reason for this neglect is that most observers think that with the permanent entry migration program set at 190,000 over recent years, it must be the main source of the growth in Australia’s migration population. It is not. Near half of those receiving a permanent entry visa in 2016-17 were already residing in Australia when granted the visa. As a consequence they are not included in the count of NOM arrivals.

This leads to the central point of this paper. Most people are concerned about the scale of migration. It is not a big issue whether the formal migration program is pushed up or down a bit. NOM is the best indicator of this outcome. On this metric, overseas students are far more important contributors to Australia’s population growth than the net inflow of permanent entry visa holders.

This report examines the consequences of growth in the overseas student presence for the labour markets and for the congestion issues now afflicting Sydney and Melbourne.

It also has much to say about the decline in teaching standards in Australia’s universities. These universities have prioritised the recruitment of overseas students over domestic students because of the much higher fee revenue. Between 2012 and 2017, the share of commencing overseas students of all commencing students in Australia’s universities grew from 21.8 per cent to 28.9 per cent and to around 40 per cent in Group of Eight (Go8) universities.

How did explosion in enrolments come about? It was a direct consequence of Australian government policy.

The ground work was laid in the early 2000s when the Howard Coalition government first allowed, indeed encouraged, overseas students to apply for permanent residence after completing their courses. The government did this partly in response to university lobbying. The universities thought that this would promote overseas student enrolments, thus providing them with another source of revenue.

This was the start of the slippery slope leading to the current extraordinary degree to which universities are dependent on the fee revenue from overseas students to finance their operation. By 2017 this revenue as a share of all operating revenue in Australia’s universities was 23 per cent. It was over 30 per cent in most Go8 universities.

But back to the 2000s, the costs were soon evident. Overseas student enrolments exploded, particularly in Vocational Education and Training (VET) courses during the 2000s. Many were attracted to the easy access to permanent residence (PR) then available.

Over the years 2009-2011, the Labor government tightened the rules on English language and financial requirements as well as access to onshore PR visas for overseas students, especially those that had obtained VET credentials.

As a result of these reforms, the number of VET student visas collapsed. However, higher education overseas student visas issued also fell. They peaked at 133,859 in 2008-09, but fell to 113,160 in 2011- 12.

Following protests from the overseas student industry, the Labor government commissioned an inquiry (the Knight Review) published in 2011. This report recommended the reversal of the 2009-11 reforms.

The Labor government subsequently watered down the rules on English language and financial requirements for overseas students and largely devolved their implementation to the universities themselves (see pp. 6-8). Again, following Knight, the universities were offered further enrolment inducements. The most important was the creation of a new post-study work visa (485). This gave all overseas students who had completed any higher education degree in Australia the right to stay on for at least two years with full work rights.

Higher education overseas student enrolments have increased sharply since 2011-12 (p. 10). They have included overseas students with very limited academic preparation and English proficiency and without sufficient funds to finance their living expenses and fees over the duration of their course.

In regard to English language skills the Australian government now permits universities to make their own judgements as to English language requirements. They can set these at below the level needed to cope with university level instruction, if they chose to. Many do, including the regional universities who have set up ‘shop front’ campuses in Sydney and Melbourne. They only require level 6.0 on the IELTS test, which is far short of what is required for university courses (p. 8).

As to the funds situation, many thousands of overseas students are being enrolled who do not hold the funds needed to finance their stay in Australia for more than a short period. They have to rely on obtaining employment here. They have created an underclass of workers with little choice but to accept whatever terms employers are prepared to offer (p.8).

The report then traces how this increased overseas student presence has translated into the huge growth in NOM attributable to overseas students described above (pp. 11-15).

The universities deny this outcome. They assert that overseas students come to Australia to consume Australia’s high quality educational offerings. When they finish they leave. According to the Chief Executive of Universities Australia (UA), Catriona Jackson, more than 85 per cent of international students return home after their studies (p. 4).

This assertion is wrong. A far higher share than this obtain a PR visa each year and many more delay their departure by obtaining another temporary entry visa. According to hitherto unpublished Department of Homeland Affairs (DHA) data, in 2016-17 some 42,541 migrants who held or once held an overseas student visa obtained a PR visa, and 34,145 did so in 2017-18 (Table 4). This means that overseas students received 23.1 per cent of the 183,600 Migration Program visas issued in 2016-17 and 21.0 per cent of the 162,417 Migration Program visas issued in 2017-18.

Most of these visas were skilled visas. But thousands also obtained a partner visa (Table 4).

Obviously, overseas students are a major component of Australia’s Migration Program. This means that a significant share of those completing a higher education visa must be gaining a PR visa each year. This report calculates that for 2016-17 around 21.2 per cent of the annual number of recent higher education completions from Australian universities received a PR visa and 17.9 per cent for 2017-18 (p. 13).

There were also a large number of former VET overseas student visa holders, including 14,370 who obtained a PR visa in 2016-17 and 10,345 in 2017-18. Most of these students had been in Australia for years. They had managed to stay here by transferring from one temporary visa to another before eventually finding a PR pathway, mainly by finding an employer to sponsor them or a resident to sponsor them as a partner (Table 5).

This finding introduces a key finding in this paper. This is that obtaining a PR visa is not the most important means of staying on after completion of studies. Rather, it is by delaying their departure by transferring to another temporary visa. This is a major factor in the gulf between overseas student NOM arrivals and overseas student NOM departures.

Overseas students (especially those from the sub-continent of India) show a high propensity to seek and obtain another temporary visa each year. Table 6 provides an indication of these numbers. The most important of these pathways is the 485 visa. In 2017-18, 46,711 overseas students were granted a 485 visa (Table 6).

An important indicator of the determination of many overseas students to stay on in Australia is their high propensity to appeal any decision by the Department of Immigration to deny them an additional visa. This enables them to stay in Australia while their appeal is heard by the Administrative Appeals Tribunal (p. 16).

Implications

For Australia’s universities, there has been an erosion of teaching standards and a resulting mounting threat to their reputation. This flows from the creation of overseas student enclaves in the fields these students focus on, mostly in business, administration and to a lesser extent information technology.

Universities have had to adjust their curriculum and teaching standards to accommodate the limited academic preparation and often poor English skills of the students in question.

For the wider Australian society, the flood of overseas students has had major impacts on the labour market and quality of life in Australia’s major metropolises, particularly Sydney and Melbourne.

As to the labour market, migration advocates like to claim that the influx of migrants is augmenting Australia’s skilled workforce. This is not the case for the overseas student component.

Any link between Australia‘s skill needs and the overseas student workforce is fortuitous. There is no skill filter governing the entry and stay of overseas students, except to a limited degree for those who obtain a temporary work visa (6,098 in 2017-18 according to Table 6) or a permanent entry skill visa.

Most of those holding an overseas student visa do not possess professional or trade qualifications accepted in Australia. And, because they hold temporary visas, employers are usually only willing to recruit them on a casual or part-time basis. They enter low-skilled labour markets (notably in hospitality, retail and other service industries). The costs are borne by the many young domestic workers who do not possess post-school qualifications and who are also seeking work in these occupations. These domestic job seekers face ferocious competition from overseas students and other temporary migrants. This has eroded wages and conditions.

Regarding quality of life issues, the main impact is the exacerbation of congestion issues, again, mainly in Sydney Melbourne. As noted, overseas students are the main source of population growth in inner city Sydney and Melbourne. They are locating in the eye of the storm of these congestion problems. In the absence of overseas students, the need to transform these locations for high-rise apartment blocks, to rebuild inner city infrastructure and incur the massive future public debt resulting, would be far less.

What to do?

The overseas student industry needs another era of reform that will reverse the liberalisation measures implemented since 2011. This may not happen soon because of the iconic status of the overseas student industry, particularly its success as a generator of export income.

However, cracks are appearing in this façade, especially with the growing awareness of the deterioration of the universities’ educational standards.

It is hoped that the information in this paper will contribute to greater public awareness of the need for a review of the overseas student industry. In 2016 the Productivity Commission warned that the indirect costs of the overseas student industry ‘could potentially offset the net benefits to the community’ (p.1). The evidence gathered in this report suggests that this warning is no longer something that could ‘potentially’ happen. It is already evident.

There is an obvious need to reduce the burdens of Australia’s migration influx. Action should start with reforms of the overseas student component – rather than fiddling with the permanent entry visa program.

My only minor gripe with this paper is the assertion that Australia’s population crush is being caused primarily by temporary foreign students, whereas the permanent migrant intake is only playing a secondary role:

Part of the reason for this neglect is that most observers think that with the permanent entry migration program set at 190,000 over recent years, it must be the main source of the growth in Australia’s migration population. It is not. Near half of those receiving a permanent entry visa in 2016-17 were already residing in Australia when granted the visa. As a consequence they are not included in the count of NOM arrivals…

As Dr Birrell himself notes, “near half of those receiving a permanent entry visa in 2016-17 were already residing in Australia”. Therefore, if those permanent visas were not granted, then those temporary visa holders would not have been permitted to stay and temporary departures would have been around 90,000 higher (circa 230,000). Consequently, net temporary arrivals would have been around 96,000 instead of 186,000 in 2017-18.

Over the long-run, it’s the permanent migrant intake that determines Australia’s population growth, since it determines whose allowed to stay in Australia and who must ultimately leave. Those granted permanent residency then go on to have children (counted as ‘natural increase’), which adds further to Australia’s population stock.

This minor gripe aside, the rest of the findings of this paper are spot on, especially with regards to Australia’s degraded higher education system, where the evidence is irrefutable.

Several years ago, both Fairfax and the ABC reported that international student colleges had taken cash kickbacks in return for helping overseas workers and students win Australian visas using fake qualifications.

In a report entitled “Degrees of Deception”, Four Corners uncovered that cheating and plagiarism was rife across Australia’s universities, driven by international students.

Around the same time, a large-scale essay ghostwriting service targeting Chinese students made national headlines in 2014. Whistleblowing academics also accused their universities of contributing to systemic cheating by welcoming international students who are “functionally illiterate”.

In 2018, an ABC investigation “uncovered an abundance of international students who describe struggling to communicate effectively in English, participate in class, or complete assignments adequately”. Various academics, employers and education experts also told the ABC that “English language standards are often too low or can be sidestepped via loopholes, and that students are often put in stressful classroom situations that can lead to cheating”.

The situation has become so bad that the Victorian Government in January called for a review of entry requirements into Australia’s universities amid widespread evidence that international students with poor English language proficiency are badly eroding education standards and placing intense strain on lecturers and university staff.

Immediately afterwards, a group of university academics admitted they are lowering teaching standards and passing failing international students in order to maintain the foreign student trade.

Even the international student association called for greater regulation of overseas migration agents amid widespread cheating on English tests to gain access to Australian universities.

Despite the long list of scandals, the chief executive of the International Education Association of Australia, Phil Honeywood, spat the dummy at Dr Birrell’s report and denied there were problems:

Phil Honeywood… said the university community was “fed up” with Dr Birrell using migration figures to attack universities and overseas student numbers…

Honeywood accused Dr Birrell of “looking narrowly” at the issue without considering the benefits overseas students brought to Australia’s economic growth.

“He never acknowledges the $34 billion injection into the economy.

Whereas the Grattan Institute’s Andrew Norton ridiculously argued that international students provide important jobs in low-skilled areas like “cleaning, hospitality and Uber driver jobs”:

“There are substantial economic benefits as well,” he said. “There are tens of billions of dollars spent in fees and living expenses, and the flip side is that there is a large labour force as well in areas where there’s demand for it — cleaning, hospitality and Uber driver jobs.”

Separately, The Australian ran an article highlighting how the international student trade is being exploited as a pathway to permanent residency:

Nepalese international student Abhie Ghimire has not looked back since he decided to pursue his university education in Australia three years ago…

“Around 80 per cent of the people in my degree are international students,” Mr Ghimire said. “My parents are covering my tuition, which is about $11,600 a semester, but it’s expected that I’ll pay them back as soon as I gain full-time employment here”…

With his student visa expiring when he graduates next year, Mr Ghimire has already begun the process of applying for a temporary graduate visa and hopes to eventually become a permanent resident in Australia…

Waking up at 5am, Mr Ghimire works 20 hours a week in a casual cleaning job — the maximum hours international students can work legally.

Curiously, the $11,600 a semester in fees and the living expenses incurred (paid for by working domestically as a cleaner) are both counted towards Australia’s purported $32 billion of education exports, even though only the fees represent a true export. Moreover, there is no account of the funds that will be sent home once Abhie Ghimire gains post-university full-time employment.

Indeed, net migrant remittances from Australia have ballooned to around $US5 billion in 2017 as the immigration/student intake has skyrocketed:

Surely these too must be netted against the rubbery $32 billion ‘export’ figure?

Whatever the case, one of the first courses of business for the incoming government should be a full Productivity Commission (PC) review into Australia’s bloated international student trade. Let’s see some transparent analysis of the costs and benefits from this program.

unconventionaleconomist@hotmail.com

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