by FRANK LARKINS and IAN MARSHMAN
We recently made an assessment in Campus Morning Mail that ‘the worst may be over’ ( in terms of the financial pain the COVID-19 pandemic has imposed on the Australian university sector as a whole in 2020 and 2021. The outcomes for individual universities are assessed in this paper.
Of course, the extent of any financial recovery -and indeed whether in fact it emerges at all – now depends on the virulence of Omicron and any subsequent variants and the public health actions Australian governments take in response.
Using the same drivers of revenue reported in our previous work (campusmorningmail.com.au), now applied to individual universities, it is possible to evaluate their potential for financial recovery in 2021. The predicted increased revenue streams are:
- An expected 5% increase in Government Grants, student HECS payment and related income streams,
- The known proportion of the $1 billion in additional research funding received (https://www.dese.gov.au/research-block-grants/announcements/2021-research-block-grant-allocations-released) , and
- Recovery of investment returns to at least the 2019 level.
For the whole sector, these revenue streams correspond to a 15 per cent increase in 2021 income compared with 2020.
The total revenue outcomes of individual universities in 2021 will be determined by the extent to which these revenue streams may be off-set by changes in Fees and Charges receipts – of which international fee revenue makes up around 90 per cent. In aggregate, we predicted previously that in aggregate and before applying some level of annual indexation, the sector could decrease 2021 Fees and Charges income by up to 30 per cent before 2021 total income fell below 2020 levels. The outcomes for individual universities on these revenue streams are known to vary widely as assessed in previous papers.
In the table below the predicted percentage increase in revenue for each university from 2020 to 2021 is shown (Column A), based on the three ‘revenue growth’ streams identified above. The percentage loss in Fees and Charges that could be sustained and still secure an actual level of funding identical to that for 2020 is also shown (Column B). Universities are ranked in accordance with the expected increase in the three revenue streams.
| Estimated % Increase in three revenue streams (Column A) and the corresponding decrease in Fees and Charges (Column B) to retain a net 2021 income equivalent to the university 2020 income. | ||||||||
| Column A | Column B | Column A | Column B | Column A | Column B | |||
| S Cross | 5% | 12% | C. Darwin | 9% | 19% | Adelaide | 15% | 35% |
| ACU | 5% | 25% | JCU | 9% | 19% | UNSW | 16% | 23% |
| CQU | 6% | 10% | Macquarie | 9% | 20% | Deakin | 16% | 27% |
| Canberra | 6% | 16% | C. Sturt | 9% | 25% | Curtin | 19% | 64% |
| S Qld | 6% | 28% | Flinders | 9% | 30% | QUT | 19% | 56% |
| S Coast | 6% | 31% | E. Cowan | 10% | 23% | UWA | 20% | 85% |
| Swinburne | 7% | 16% | W Sydney | 11% | 44% | Monash | 20% | 24% |
| N England | 7% | 48% | Griffith | 12% | 35% | Wollongong | 22% | 30% |
| RMIT | 8% | 9% | Murdoch | 12% | 27% | Tasmania | 22% | 78% |
| USA | 8% | 24% | Federation | 13% | 17% | Sydney | 22% | 25% |
| La Trobe | 8% | 26% | Queensland | 13% | 25% | Melbourne | 23% | 35% |
| Victoria | 8% | 25% | Newcastle | 15% | 56% | ANU | 30% | 106% |
| UTS | 8% | 12% | All Unis | 15% | 30% | |||
As shown, it is expected that universities will increase their positive revenue streams over a wide range, from 5 per cent for Southern Cross to 30 per cent for ANU with the average being 15 per cent. (Column A). Almost half the universities (18) are predicted to have increased revenue of less than 10 per cent. In general, these are universities with small or no investment portfolios and with research profiles precluding receipt of significant levels of additional research funding. Just five universities might expect an increase of more than 20 per cent, principally due to a strong recovery in investment income, but also for some because of their larger share of the additional research funding.
Based on these assumptions of revenue growth, the capacity to withstand predicted further Fees and Charges losses varies widely as presented in Column B. RMIT is most vulnerable on this basis as it could sustain only a 9 per cent loss in Fees and Charges revenue and still achieve a 2021 total income equivalent to its 2020 income. RMIT is followed by two other universities also with historically high dependency on international student fee income – CQU and UTS – which respectively could sustain only a further 10 per cent and 12 per cent loss respectively in Fees and Charges receipts and deliver the same revenue outcomes as for 2020.
At the other extreme modelling shows that ANU could lose all its 2021 Fees and Charges income and still have more income in 2021 than in 2020. This is because of its expected strong recovery in investment returns (at least $172m) and an increased research block grant of $72m. The extreme position for ANU does require some caution in making judgments based on our assumptions. In declining order UWA, Tasmania, Curtin, Newcastle and QUT also appear to be in strong positions with each being able to incur at least a further 50% reduction in Fees and Charges revenue to deliver the same revenue outcome as for 2020.
In making judgments about the capacity of individual universities to limit further Fees and Charges losses in 2021 one needs to take into account also actual losses incurred in 2020. While the sector average loss in Fees and Charges revenue was 10per cent significant variation occurred across institutions. Eight universities reported losses greater than 20 per cent. Of the universities with comparatively little margin for Fees and Charges losses in 2021, RMIT, CQU, Federation, Southern Cross, UTS and Swinburne each reported greater reductions in Fees and Charges revenue in 2020. On the other hand, four universities reported actual increases in Fees and Charges, notably including Monash, and so appear well-placed at least to maintain revenue at 2020 levels.
Within the Group of Eight, Adelaide (35 per cent), Melbourne (35 per cent), UWA (85 per cent) and ANU (106 per cent) are above the sector average (30 per cent) in terms of headroom for further losses in Fees and Charges. The additional funding for research, along with anticipated improvements in investment revenue have clearly helped strengthen the position of these universities. Monash, Sydney, Queensland and UNSW also are all able to sustain fee losses greater than in 2020 and still have higher 2021 total incomes.
Providing no further major pandemic-induced disruption occurs and universities are willing to take full account of anticipated improvements in investment returns, it does appear that 2020 might well be the year when the harshest impact on university revenues occurred.
Our conclusion is that some 28 of the 37 universities profiled could sustain greater fee losses in 2021 than in 2020 and still report higher total revenue. Net financial results for 2021 will depend on how expenditure outlays change relative to 2020. Employee benefit expenditures will be the key. Our analysis suggests, among other things, that the case for further significant losses in higher education jobs should have diminished or at worst now be on hold.
Frank Larkins and Ian Marshman
Melbourne Centre for the study of Higher Education
The University of Melbourne