Education as the new engine of growth

Growth in Victorian education exports is picking up again after the downturn of the GFC, driven especially by Chinese and Indian students.

As the ‘education state’, there are plenty of existing and new international markets on which Victoria could focus.

Recently I wrote about a speech by RBA Assistant Governor (Economic) Luci Ellis regarding Australia’s search for a new ‘engine of growth’ following the demise of the mining and resources sector, and the similarly inherently temporary nature of the residential housing market boom, the increasing labour force participation rate, and the government transport infrastructure boom.

One such area Luci mentioned (even though her point was that there needn’t be just one engine of growth) was education exports. And there are numerous interesting insights that can be gleaned from the data as to the increasing number of international students purchasing Australian education services.

VICTORIA'S EDUCATION EXPORTS ARE GROWING

Victoria saw a rapid increase in international student enrolments and commencements leading up to the GFC, increasing more than 2.5-fold between 2002 and 2009. The Australian dollar dropped suddenly in the wake of the GFC, which should have cushioned our education exports, but the impact of the GFC on other countries was so great that international enrolments and commencements in Australia still dropped (particularly in Victoria, causing its national share to fall). And the subsequently strong Australian dollar would not have helped either.

But numbers have recovered in line with a falling Australian dollar, exceeding their pre-GFC levels by 2015. And note that the numbers for 2017 only go up to October, so the continuing upward trend should look even more impressive than it appears below.

International Student Enrolments and Commencements, Victoria, 2002-17
Source: Department of Education and Training, 2017
Note: 2017 only goes to the end of October

Australian Dollar vs US Dollar and Trade-Weighted Index, 2002-17
Source: Reserve Bank of Australia, 2017

CHINA AND INDIA FOR THE WIN

China by far provides the largest share of Victoria’s international student enrolments (almost one-third), followed by India, Malaysia and Vietnam. 

Top 20 International Student Enrolment Source Markets, Victoria, 2017
Source: Department of Education and Training, 2017

The graph below shows that this Chinese share has been increasing steadily since 2002, in line with China’s continued economic growth, but India’s share is yet to recover from the slump following the GFC.

Top 4 International Student Enrolment Sources, Victoria, 2002-17
Source: Department of Education and Training, 2017

WHERE DO THE OPPORTUNITIES LIE?

Compared to Australia though, Victoria has a significant advantage over the rest of Australia in terms of both Chinese and Indian students, with Victoria’s share being 5.0% and 2.6% greater than Australia respectively. In fact, Victoria used to have an advantage of almost 12% in terms of Indian students. Perhaps this is a market Victoria can recapture in the coming years, as well as maintaining its new advantage with Chinese students.

Other countries where Victoria has an advantage it may be able to maintain or improve include Malaysia, Sri Lanka and Vietnam.

However, these advantages may indicate these markets may only have limited unexploited potential remaining. Alternatively then, Victoria may wish to focus more so on countries where its share of international students is less than Australia as a whole. Brazil for example, has been deteriorating as a source market for Victoria since at least 2002, now 2.9% below Australia’s share. Nepal too has deteriorated in recent years to 2.0% below Australia, and Korea – despite recovering recently – is still 1.6% below Australia’s share.

Japan and the US recovered nicely from earlier shortfalls and are now less than 1% below Australia’s share. These countries may offer insight into how to attract students (back) to Victoria.

Most Significant Gaps in Victoria’s Share of International Student Enrolments vs. Australia, 2002-17
Source: Department of Education and Training, 2017

THE IMPLICATIONS ALSO EXTEND TO ACCOMMODATING THESE STUDENTS

This blog provides just a bit of background to the issue. A far more data-intensive analysis is required, that illustrates trends in student living arrangements across Melbourne, and the forces behind these trends. Students tend to demand a specific kind of housing compared to professionals, families or retirees. So to be able to identify growth in international student numbers, where they are coming from, and where they are living, will have significant implications for meeting housing needs throughout Melbourne and Victoria.

As the ‘education state’, Victoria has a reputation to uphold. And growth in this sector is something Victoria must properly identify and define if it is to capitalise upon it as it should.