by IAN MARSHMAN and FRANK LARKINS
Previously we estimated that the loss of revenue, predominantly from the collapse of the international education market, would amount to at least $13bn by end 2023. We then commented on possible responses the Australian Government might take to provide assistance. Measures individual universities may need to consider to mitigate losses are discussed here.
With the guaranteeing (at least for 2020) of grant funding for Australian subsidised student programmes, the financial impact on individual universities will depend largely on their exposure to the international student market and the nature of that exposure.
A sector-wide average of 24 per cent of total revenue generated from international student fees masks significant variations for individual institutions with some approaching 40 per cent and others between 10 per cent and 20 per cent. Institutions with significant offshore operations may be better off than those solely campus-based in Australia.
Based on 2018 data – the latest available for the sector -Sydney, UNSW, Melbourne and Monash universities, within the Group of Eight are the most significantly exposed, with average revenue of $831m, comprising over 34 per cent of total revenue. Based on a conservative forecast, it is reasonable to assume an average unindexed reduction in fee revenue over the period 2020- 23 for each of these institutions will be in excess of $1 billion. For a university with an annual $100 million international student program, a more modest loss of $120 million might accrue over four years.
There are a number of actions that individual universities can take. Some have already been placed on the public record. Actions include:
* where short-term or finite revenue loss is anticipated, drawing on past retained surpluses to cover at least part of the loss. Over the period 2014-18 Australian universities earned $7 billion per annum in international fees. For 2018 the total amount of retained operating surplus across the sector was $1.46 billion.
* a delay or scaling-back of uncommitted capital works. Given the decline in fee revenue, it makes sense to lower infrastructure aspirations at this time.
* a major review of future infrastructure requirements. The alternative configuration of some traditional campus-based infrastructure such as lecture theatres might realise capital savings opportunities in an increasingly digital world.
* a rigorous review of other expenditure costs, including travel, use of consultants and marketing expenses
* a reappraisal of head office structures and remuneration levels, with a view to consolidation of roles which may have emerged in a period of plenty.
* a further review of administrative and professional staff costs, using available sector-wide benchmarking to assess relative efficiency.
* as one university has already announced, a rationalisation of course and subject offerings so as to ensure individual program viability over the longer term.
* given that employee costs represent 57 per cent of total university expenditure, reductions will inevitably occur both to reflect the reduction in student enrolments and to adjust workforce capabilities to changed future requirements.
As already reported, casual and fixed term staff are likely to bear the brunt of this. Universities Australian has estimated that job losses could be as high as 21,000. To avoid further job losses universities may need to seek collaboration with unions to have existing enterprise agreements altered to allow for a temporary salary freeze.
While the attention might be on cost reductions in the short to medium term, universities will need to invest further in digital education and creating new forms of enhanced student experience capable of attracting and retaining both domestic and international market share in a post COVID-19 era.
Ian Marshman is a former Senior Vic Principal and Frank Larkins a former Deputy Vice Chancellor at The University of Melbourne.
They are honorary fellows at the Centre for the Study of High Education, University of Melbourne