Higher education policy analysts have been waiting with anticipation to assess the impact of the COVID-19 pandemic on the 2021 financial performances of Australian universities. The primary data sources are the 2021 university annual reports that are now being tabled in the relevant parliaments. Some universities are still to report their financials.

A series of papers analysing individual university outcome by state are currently in preparation. The first detailed analysis completed has been for NSW universities The headline numbers would indicate a remarkable financial recovery by all ten universities from 2020 to 2021; however, when one-off exceptional items are excluded the 2021 performances as an indicator of strong financial recovery trends are less certain.

key findings in aggregate for the ten NSW universities include:

* the combined total incomes from continuing operations increased by $1.65bn (15.2 per cent) to $12.33bn from 2020 to 2021

* total expenditures were reduced by $0.65bn (5.8 per cent) to $10.44bn, principally because of savings on employee benefits. All universities had lower expenditures in 2021 than in 2020

* the net outcomes translated to combined surpluses of $2.11bn in 2021, compared with deficits of $0.19bn in 2020, a seemingly remarkable turnaround. Nine of the ten universities reported a surplus in 2021 compared with four in 2020. Wollongong had a deficit in both years

* government assistance increased by $461m (8.6 per cent) in 2021, boosted by the one-off receipts of $297m to NSW universities from the special research fund of $1 000 million established by the Federal Government to offset the pandemic impact

* student fees and charges revenue was only $10m less than for 2020, with the accumulated two-year reduction being $920m compared with the 2019 level. It appears that universities have been able to limit any further overseas enrolment pipeline decline in 2021 and compensated with fee-paying domestic students to achieve an outcome, still adverse, but comparable to 2020

* investment income for 2021 was 3.7 times greater than for 2020, a substantial increase of $735m (191 per cent) while other revenue increased by $465m (41 per cent). The major reason for these increases has been the windfall receipts of several hundred million dollars received from Education Australia Limited for the transfer and sale of IDP Australia shares. It was estimated that at the time of the transfer in August 2021 that Australian universities would receive assets from the distribution worth $1.14bn billion

* In the detailed paper it is estimated that the 2022 total income for NSW universities may be of the order of $700m less than the 2021 total income

Some notable findings for individual universities were:

* the student fee reduction for Macquarie university was $14m more in 2021 than in 2020. Investment and other revenue improved by $39m and the special research funding was $18m. The surplus of $30m achieved for 2021 was because of the one-off revenue contributions

* Southern Cross U was the only university to receive less income in 2021 than in 2020. It did not benefit significantly from the special 2021 allocations

* Uni Sydney managed to minimise the impact of the pandemic on its 2020 and 2021 finances. It was a major beneficiary of the special research funding and the IDP income. Furthermore, Uni Sydney was the only NSW university to increase its student fee revenue from 2020 to 2021. Consequently, an exceptionally large income increase of $886m was achieved from 2020 to 2021 leading to a trading surplus of $1.05bn in 2021 (equal to 30 per cent of all the 2021 income). This surplus was half the total attributed to all 10 NSW universities

* University of NSW increased its 2021 income by $253m, with the special funding accounting for an estimated $184m. It minimised the further reduction in student fees to just an additional $4m more than the $185m reduction reported for 2020. UNSW student fee reduction over two years was $394m, while Sydney reported a gain of $242m

* Uni Wollongong reported a net income increase of $29m for 2021 compared with a decrease of $70m for 2020, predominantly because of the special allocations. Student fee income was $80m less in 2021 than in 2020 compensated for mainly by the special allocations. Nevertheless, Uni Wollongong incurred a net deficit in both 2020 and 2021

* Western Sydney U reported one of the most significant financial transformations from 2020 to 2021. There were strong improvements in all income categories except student fees, such that a 2020 $28m income decrease became an $87m increase for 2021. Investment and other revenue streams account for $81m of the total income increase

* UTS did report a 2021 income increase of $64m; however, it received $112m in special 2021 funding. This amount was more than the overall total income increase of $64m as there was a further $42m reduction in student fee income. Over two years UTS student fee income was reduced by $202m relative to the 2019 base

* University of Newcastle benefited significantly from the 2021 special funding allocations. Increased government assistance combined with investment dividends accounted for $111m of additional income. These items contributed to a total income improvement of $154m from 2020 to 2021

* Uni New England was the only university to increase its total income from 2019 to 2020. The pandemic had minimal impact with only small reductions in student fee incomes in 2020 and 2021. Investment income of $78m and special research funding of $8m essentially account for the $91m increase in 2021 total income compared with the $7m 2020 increase

* Charles Sturt University reported an investment income improvement of $101m, while incurring a further reduction in student fee income of $48m for a combined fee income reduction of $157m since 2019. Consequently, Charles Sturt U was able to achieve a total income increase in 2021 of $78m over 2020. It also achieved sizeable expenditure reductions in both years leading to net surpluses.

The analyses conducted highlight why much caution needs to be exercised as to whether the financial outcomes of 2021 represent a base for stronger recovery for universities in future years. Several universities would have had low or no cash flow surpluses without the special allocations.

As well as the loss of several hundred millions in one-off revenues several other factors have the potential to adversely impact on the 2022 financial performances of all Australian universities.

International student demand is still slow to recover, equity markets are volatile and international tensions are high. Furthermore, commencing student demand for university places tends to be counter-cyclic to low unemployment levels and attractive job opportunities for high school graduates. For enrolled students, inflationary pressures will make tuition costs and living expenses more expensive further reducing demand, especially for students enrolling in non-STEM subjects, because of the Job Ready Graduate Policy impost.

There are challenging times ahead for the management of university finances.

Frank Larkins 1 July 2022.

Frank Larkins is an honorary professorial fellow at the University of Melbourne’s Melbourne Centre for the Study of Higher Education and its School of Chemistry


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