Senator David Pocock's additional comments

National impact of the bill

1.1With its Future Made in Australia legislation the Albanese government recognises, in part at least, the urgent need for Australia to build a new economic future. A future that’s less reliant on the “dig it and ship it” fossil-fuel-driven revenue base that has sustained us in the past and more adapted to an energy transitioned economy adapted to our changing climate.

1.2The Education Services for Overseas Students Amendment (Quality and Integrity) Bill 2024 stands in stark contrast to that vision for Australia’s future.

1.3As drafted, the ESOS Bill imperils Australia’s biggest export industry outside of iron ore, coal, and natural gas.[1] A sector that was worth $47.8 billion to the Australian economy in 2023 and accounted for more than half of Australia's economic growth in 2023. As the Group of Eight highlight in their submission:

…spending by international students was responsible for a 0.8 percentage point increase in GDP in 2023, over half of the recorded economic growth for that year.[2]

1.4According to data provided by the Department of Education, in 2024 estimated Higher Education New Overseas Student Commencements for publicly funded universities was 161,484.[3] The Government has proposed a National Planning Level limit for these universities of around 145,000 commencements for 2025. That represents a sector-wide, year on year cut to international student numbers of more than 10 per cent.

1.5There is broad agreement among stakeholders that the Bill’s quality and integrity measures are welcome.

1.6For example, Universities Australia said it ‘supports the government's intention to maintain the integrity and sustainability of the international education sector…’[4]

1.7There is also recognition from across the higher education sector that unchecked growth in international student numbers poses a social licence challenge in terms of overall migration numbers and also as regards domestic student experience.

1.8We need to have a sensible conversation about migration, about how big we think Australia should be. We need a plan and clear targets that consider things like housing, infrastructure, impacts on the environment and our priority migrant skills needs.

1.9However, despite repeated questions from Senators on the committee, Treasury, Home Affairs and the Department of Education were unable to confirm what the national net overseas migration (NOM) target is for Australia. They advised the committee that there is in fact no target, only a forecast of the NOM.

The current forecasts for NOM were published in the 2024-25 Budget. Treasury will produce updated NOM forecasts for the 2024-25 MYEFO. The ABS publishes NOM statistics on a quarterly basis.[5]

1.10Given the significant economic, as well as social and cultural, benefits the international education sector brings to Australia it is deeply concerning that Treasury has done no modelling on what impact the proposed National Planning Level limits will have on the economy at the national or local level.

1.11The Reserve Bank of Australia has indicated its concerns noting in its latest meeting minutes that it was assessing the implications of the Bill saying it was ‘expected to weigh on services exports’.[6]

1.12Capital Economics has said:

We calculate that the proposed cap on international student commencements will cause education exports to plunge by around two-fifths, shaving off 0.7 percentage points off growth in 2025.[7]

1.13Organisations were not given their indicative caps until part way through the senate committee inquiry.

1.14Initially we were told:

Senator DAVID POCOCK: There's no actual goal for the net overseas migration for next year?

Ms Cavanagh: Net overseas migration is a forecast.

Senator DAVID POCOCK: Do you have a goal for what you want to try and get it to?

Ms Cavanagh: I'd take you back to that statement that's in the migration strategy as released last September—

Senator DAVID POCOCK: I heard that. It's one thing to say pre-pandemic levels, but there are decades and decades of years pre-pandemic. We're hearing a lot of talk about reducing migration, and I think there's a lot of people who would agree [with] that. I'm also hearing that we don't actually have a number in mind, we're just reducing.

Ms Cavanagh: I can only repeat what the government has said.

Senator DAVID POCOCK: I'm interested in what Home Affairs is working towards.

Ms Cavanagh: We're not working towards a number.[8]

1.15After the release of the indicative caps, Treasury said:

Treasury provided advice on the impacts of a National Planning Level for new international student commencements as part of the Cabinet process. Treasury will continue to assess any potential effects as part of updating its forecasts for net overseas migration in the 2024-25 MYEFO, taking into account latest available indicator data and other relevant information.[9]

1.16This wholly inadequate response does not give the committee, or the Australian community, any understanding of what the impact of these far reaching changes that touch every higher education provider in Australia’s fourth largest export industry will be.[10]

1.17Universities Australia estimates that already the combination of Ministerial Direction 107, increased student visa application fees from $710 to $1600 and the indicative national planning limits have cost Australia’s economy $4 billion.[11]

1.18The lack of Treasury modelling compounds the government’s failure to provide a regulatory impact statement for the Bill, a point raised by the University of Melbourne’s Deputy Vice-Chancellor Global, Culture and Engagement Professor Michael Wesley. The Bill introduces significant changes to the regulatory framework for international education, and it is important that the potential costs and benefits of these changes are carefully considered.

1.19Despite the lack of modelling and analysis, the impacts of these changes are clearly already being felt.

1.20Responses to Questions on Notice from Home Affairs show visa applications are down year on year.

Higher Education Sector Visa Applications

1.21The most recent student visa applications from July and August paint a deteriorating picture.

Student visa applications

1.22Immigration expert Abul Rizvi and higher education expert Professor Andrew Norton were both recently quoted in the media saying these figures ‘suggested many institutions wouldn’t reach the new international student caps that the government wants to introduce from next year’.[12]

1.23These most recent changes come after a difficult period for universities and other higher education providers whose operating budgets were hit severely during the COVID-19 pandemic and who were largely excluded from federal government support.

1.24As former Education Minister Kim Carr said:

There’s a strong case to say that universities are now too big and there is a legitimate case to be argued in regard of quality assurance. But caps are bad policy and ignore the Faustian deal that when the universities were not properly funded, they turned to international education as a way of securing the revenue they needed.[13]

Student numbers and funding

Parliamentary Library

1.25In the absence of meaningful funding of the true cost of research in Australia by our government, the proposed caps are a serious threat to our research in Australia across all universities. As a reminder, over the last decade, the percentage of Australia’s gross domestic product (GDP) spent on Research and Development (R&D) has fallen continuously. National investment in science and research across the economy — business, government and universities according to the 2023 Australian Bureau of Statistics — fell from 1.80% in 2019/20 to 1.68% in 2021/22. Our national investment in research funding is pale compared to that of our friends such as the U.K., Germany, South Korea or the U.S., which are closer to 4%.

1.26Of concern is the reputational damage Australia’s international education sector will suffer as a result of these changes which were announced with no consultation and were not foreshadowed in the year-long Universities Accord consultation process that proceeded them.

1.27Given the proposed start date of 1 January 2025 and where these reforms come in the international student enrolment cycle, serious concerns have been raised about institutions having to rescind offers already made to students.

1.28Collectively, the Group of Eight (Go8) universities had made around 50,000 offers to international students for the 2025 academic year, and that it was unclear how many of these offers would need to be rescinded if the new caps were implemented. CEO Vicki Thomson stated:

Rushing this legislation through is a critical mistake. In our case, we’ve already made 50,000 full and conditional offers to students to start in 2025. That reflects the 18-month timeline it takes to recruit students. And those students will not come back the following year.[14]

1.29Multiple witnesses pointed to the experience of Canada implementing caps, and the resulting decline in international student demand for study there. Almost 50 per cent of potential students in a recent IDP survey are considering study elsewhere, and page searches by Studyportals show a sharp drop in interest in Canada and more recently the UK.[15]

1.30Evidence tendered to the committee points to a real risk of international student caps repeating the failed experiment that was Job Ready Graduates by seeking to force students to study particular courses or at particular institutions or locations.

1.31Western Sydney University’s evidence to the committee highlighted some of the perverse outcomes and unintended consequences likely to result from the bill. Vice-Chancellor, Distinguished Professor George Williams AO, said:

The bottom line for us is that we're down a thousand students on the number of students we would have liked to take next year. That will cost us $26.5 million in revenue next year, or about $78.4 million across the life cycle of those students. In our case, for every dollar we take in from an international student, 24c goes to supporting other activities, particularly our domestic students. So 24c in every dollar goes to our food pantry for domestic students, to equity issues and to study help. So we're thinking very carefully about how this will affect our Australian students, because we will no longer be able to offer some of the vital programs they need to get through university.[16]

1.32The bill's broad application could also deviate from the original intent of focusing on problematic providers without imposing undue burdens on reputable institutions.

1.33Independent Higher Education Australia (IHEA) has raised concerns that the bill's measures will impose an excessive regulatory burden on high-quality providers with a strong record of integrity, regardless of their past performance. They are also critical of the bill's criteria for cancelling courses based on perceived value to Australia's skills needs or public interest, which they argue are overly subjective and risk ideological bias, potentially leading to the unjust cancellation of valuable courses.

1.34Concerns haven’t just been raised by providers. The NTEU argues that the proposed legislation would undermine the objectives of public universities and create unintended consequences for regional Australians' access to equitable education and research opportunities.

1.35The NTEU also argues that the proposed amendments in the ESOS Amendment Bill represent a poorly designed and inefficient solution that is likely to have an effect on the sector that will be more damaging than helpful. They say that the bill lacks transparency, accountability, and sustainability, and that it would disrupt and reduce the capacity of ESOS Agencies to act in an effective and appropriate way.

1.36One of the biggest concerns with the Bill is in the overreach of power it assigns the Minister. This is explored at length by Professor Norton in his supplementary submission, who says of the minister’s broad discretionary powers:

The implied threat that this allows – universities that displease the minister could be penalised with lower caps – changes the power dynamic between the minister and universities. This is not necessary to achieve the bill’s purposes. It is undesirable both as a general principle and in the context of Australia’s history of university autonomy.[17]

1.37The senate has only recently passed reforms to remove Ministerial intervention from the Australian Research Council and its grants. To be reintroducing even greater ministerial powers now without any guardrails, limited parliamentary oversight and no sunset provisions is nothing short of extraordinary.

1.38The overwhelming view from stakeholders is that this legislation, and Parts 7 and 8 relating to international student caps in particular, is rushed, poorly drafted, has been subject to inadequate consultation and will lead to perverse outcomes while failing to appropriately respond to the legitimate concerns.

1.39Tying passage of this Bill to the repeal of Ministerial Direction 107 which has already resulted in a dramatic decrease in the number of international students of almost 60,000 students in the past year[18] is extraordinarily cynical politics. Ministerial Direction 107 should immediately be revoked and replaced with a fit for purpose instrument for managing student visa applications.

Impact on the ACT

1.40The adverse national impacts from the Bill will also apply to the ACT but in a more concentrated way.

1.41Canberra is a university town, home to five university campuses and a host of innovative private providers.

1.42According to the submission from the ACT Government, there are currently around 35,000 international students in the Australian Capital Territory (ACT) contributing around $400 million annually to the Territory's tertiary education providers through course fees.

In 2023 the ACT had over 21,000 international student enrolments, and international education’s export value was $1.1 billion for 2022-23 - our single largest export by value.

Importantly, international students contribute greatly to the social fabric of Canberra, bringing diverse cultural perspectives, traditions, and experiences to the communities which fosters cultural awareness and appreciation.[19]

1.43The submission goes on to note:

Given this significance, any changes to policy settings for international students must carefully consider the impact of those changes on economies that rely on the sector.[20]

1.44The ACT has a number of revenue raising disadvantages in comparison with other jurisdictions and international education is currently our largest services export industry.

1.45While it appears that South Australia has been given favourable treatment related to the upcoming merger of the University of Adelaide and the University of South Australia and the Northern Territory has been carved out from the new international student caps altogether, no such allowances have been made for the ACT.

1.46The Australian National University’s indicative international student cap for 2025 is 3400, which is 400 students lower than it enrolled in 2024. Crucially however, it is also well below the university’s forecasts, showing the government’s rhetoric of “managed growth” to be not just empty but counterfactual.

1.47The impact of this cut to international student numbers with no lead time is already apparent with the ANU announcing plans last week to downsize the university and cut more than 50 jobs in an initial restructuring.

1.48The ANU has gone from a projected deficit of $60 million to more than $200 million this year. The university’s chief financial officer Michael Lonergan reportedly ‘told staff one of the factors impacting the university's bottom line was the international student cap.’[21]

1.49In the wake of the announcement, the NTEU has also noted that:

ANU’s financial situation has not been helped by the uncertainty around international student caps, and we repeat our call for the Education Minister, Jason Clare, to implement a transition plan to make up funding shortfalls due to federal government policy changes.[22]

1.50While the University of Canberra’s indicative international student cap of 1500 students for 2025 represents a very small increase on its 2023 numbers, it does not give the university scope to grow. And this growth is needed given the university’s operating deficit has blown out from $26 million to $36 million for this year with job cuts also foreshadowed. Nor does UC’s cap appear to recognise the fact that international students only comprise some 22% of the University’s total student cohort.

1.51Perhaps most galling for Canberra’s universities is, in setting the indicative international student caps, the lack of any recognition of investments they have made in student accommodation over the past decade.

1.52The Australian National University (ANU) has a significant amount of student accommodation available on campus. In their submission they state:

ANU has more than 6,500 beds on its Acton Campus, a ratio of 1 bed to every 1.6 international students enrolled at ANU.[23]

1.53ANU points to the range of student accommodation options available on and off-campus. In their submission they state:

The University has relied on productive commercial partnerships to grow our residential footprint. To provide these partners surety to support their investment these agreements include provisions such as minimum occupancy rates and demand tests that must be met before accommodation footprints can be expanded.[24]

1.54A failure to recognise existing student accommodation when setting caps extends beyond the ACT.

1.55Western Sydney University noted its surplus of student accommodation capacity, saying:

The University's purpose built student accommodation currently has 20 per cent spare capacity. Every one of our international students who wants a bed, gets a bed.[25]

1.56Once again, the extent of any direct link between international students and Australia’s housing crisis has not been modelled by Treasury.

1.57In response to my questioning, they said (on notice):

Treasury does not track or model the number of international students in the private rental market.[26]

1.58Instead, they estimate, while at the same time holding no data on each international higher education providers’ student accommodation offering.

1.59It is also important to highlight the impact of the Bill on private providers in the ACT. I have had providers from around the country contact my office in desperation after receiving their allocations. Two local providers have also recently spoken out publicly. Academy of Interactive Entertainment Chief Executive John De Margheriti told the Canberra Times ‘he was in total shock after being told his international student quota would be slashed from 248 to zero for 2025’.[27]

1.60While Key 2 Learning College director Michael Bermejo whose college trains workers for aged care, nursing and disability support workers, said ‘his college had been told its international student quota would be cut from 250 to 75, meaning the college would no longer be financially viable’.[28]

1.61Their experiences highlight the poorly targeted approach to restoring integrity in Australia’s international higher education sector contained in this bill. Rather than a risk-based approach that rewards high-quality providers with integrity, this model is a blunt instrument that harms all, and in many cases those who have ‘done the right thing’ by not inflating their international student numbers in recent years even more.

Recommendations

1.62The weight of evidence tendered to this inquiry leads firmly to the conclusion that this Bill should not pass without significant amendments, including winding back, and putting guardrails around, the extraordinary powers this Bill confers on the Minister.

1.63Delay commencement of Parts 7 & 8 of the Bill to 1 January 2026 to enable an orderly transition without further damaging Australia’s international reputation and the longevity of our international education sector.

1.64Include ‘sunset provisions’ in relation to the Minister’s powers so that they sunset at the sooner of two years, or when a relevant Mission Based Compact entered into.

1.65Amend the Bill to require the use of formulas and rules in the legislative instrument and remove the power to cap providers or vary legislative instruments independently of the Parliament. Establish legislated criteria for setting caps and require the Minister to provide and publish a statement of reasons for each cap.

1.66Insert a provision creating an independent process for providers to challenge and/or request a formal review of any cap they are given.

1.67Set a floor on the annual international student caps to give providers a minimum level of certainty to plan their budgets. The floor is proposed to be a cap that is not more than 15% lower than the previous year’s cap or the average of the previous three calendar years, whichever is higher.

1.68Amend the breach provisions, so that they are more proportionate, and so that suspensions are not automatically triggered for minor breaches. Include a range in the international student cap allocations to each institution to provide flexibility and minimise unintentional breaches of the cap. Include at least one warning of potential breaches prior to penalties being enforced.

1.69Insert a provision that annual international student cap limits must be provided no later than 1 July of the preceding year and be publicly notified.

1.70Require the formula for setting caps to take into account the provision of existing student accommodation, including any arrangements through third party providers.

1.71Remove the Minister’s power to set caps at a course level.

1.72Provide clarity to providers around the priority categories of students to be excluded from the caps including postgraduate research students, exchange/study abroad/mobility students, and students in transnational education (TNE) programs.

1.73Require the Minister to consult with a registered provider before determining a limit for that provider

1.74Insert a new provision requiring the government to maintain a public register of all notifications provided. Notifications to providers should be directed to be immediately included in the register.

1.75Amend the definition of education agent to make it clear that an agent is an entity that engages in the specified activities in relation to a provider in exchange for a commission, and that is listed in the PRISMS system.

1.76Better define enrolment for the purposes of setting annual international student caps.

1.77In consultation with stakeholders, develop and legislate a workable system for reallocating unused places.

1.78Narrow the reasons why the Minister can suspend or cancel a course to those with systemic integrity issues.

1.79Ensure the legislation allows new independent higher education providers to enter the market with appropriate quality and integrity safeguards.

1.80The government should develop a national plan for population and immigration that sets specific targets through consultation with Australians and consideration of impacts on housing accessibility and affordability, infrastructure, the environment and water, and our priority work skills needed.

Senator David Pocock

Participating Member

Senator for the Australian Capital Territory

Footnotes

[1]Austrade, International education data, https://education.austrade.gov.au/data, (accessed 8 October 2024).

[2]Group of Eight, Submission 40, p. 2.

[3]Senator the Hon Anthony Chisholm, Orders of 17 and September 2024 (622 and 624) relating to Higher education - International students; Education Services for Overseas Students Amendment (Quality and Integrity) Bill 2024 – correspondence to public universities, 19 September 2024, [p.21–59].

[4]Mr Luke Sheehy, Chief Executive Officer, Universities Australia, Proof Committee Hansard, 6 August 2024, p.1.

[5]Department of the Treasury, answer to a question on notice, 6 September 2024 (received 2 October 2024).

[6]Reserve Bank of Australia, Minutes of the Monetary Policy Meeting of the Reserve Bank Board, 24 September 2024 (accessed 9 October 2024).

[7]Julie Hare, ‘Labor education heavyweight says student cap plan is ‘bad policy’‘, Australian Financial Review, 8 October 2024.

[8]Senator David Pocock and Ms Tara Cavanagh, Group Manager, Immigration Policy, Immigration Group, Proof Committee Hansard, 6 September 2024, p. 49.

[9]Department of the Treasury, answer to a question on notice, 6 September 2024 (received 2 October 2024).

[10]Natassia Chrysanthos, ‘Crackdown sees international student visa applications plummet‘, Sydney Morning Herald, 2 October 2024.

[11]Natassia Chrysanthos, ‘Crackdown sees international student visa applications plummet‘, Sydney Morning Herald, 2 October 2024.

[12]Natassia Chrysanthos, ‘Crackdown sees international student visa applications plummet‘, Sydney Morning Herald, 2 October 2024.

[13]Julie Hare, ‘Labor education heavyweight says student cap plan is ‘bad policy’‘, Australian Financial Review, 8 October 2024.

[14]Ms Vicki Thomson, Chief Executive Officer, Group of Eight, Proof Committee Hansard, 6 August 2024, p. 2.

[15]ICEF Monitor, Demand for study abroad in Australia, Canada, UK already affected by new international education policies, 28 February 2024.

[16]Distinguished Professor George Williams AO, Vice-Chancellor and President, Western Sydney University, Proof Committee Hansard, 6 September 2024, p. 11.

[17]Mr Andrew Norton, Submission 38.1, p. 4.

[18]Paul Karp, ‘This article is more than 1 month old Albanese government announces plan to cap international student enrolments at 270,000’, The Guardian, 27 August 2024.

[19]ACT Government, Submission 48 Attachment 1, [p. 1].

[20]ACT Government, Submission 48 Attachment 1, [p. 2].

[21]Lottie Twyford and Jade Toomey, ‘Australian National University to cut jobs and spending as it faces $200 million deficit this year‘, Australian Broadcasting Corporation, 3 October 2024.

[22]Lottie Twyford and Jade Toomey, ‘Australian National University to cut jobs and spending as it faces $200 million deficit this year‘, Australian Broadcasting Corporation, 3 October 2024.

[23]Australian National University, Submission 62, p. 4.

[24]Australian National University, Submission 65, p. 4.

[25]Western Syndey University, Submission 111, p. 3.

[26]Department of the Treasury, answer to a question on notice, 6 September 2024 (received 2 October 2024).

[27]Dana Daniel, ‘'I feel like I'm in a banana republic': Canberra entrepreneur blasts Albanese govt‘, The Canberra Times, 4 October 2024.

[28]Dana Daniel, ‘'I feel like I'm in a banana republic': Canberra entrepreneur blasts Albanese govt‘, The Canberra Times, 4 October 2024.