The Albanese Government’s proposed legislation to cap international student numbers at 270,000 has reignited debates over Australia’s migration policies, housing crisis, and the role of universities in shaping immigration trends. On paper, the proposed cap aims to curb overcrowding at major metro universities while directing more students to regional institutions. However, a first-of-its-kind analysis by the Australian Population Research Institute (APRI) raises serious concerns about the policy’s unintended consequences, particularly its potential to exacerbate Australia’s housing shortage and strain urban infrastructure.
At its core, the proposed cap seeks to balance competing priorities: maintaining Australia’s reputation as a global education destination, managing migration levels, and addressing public concerns over housing and urban congestion. Yet, critics argue that this policy does more to serve institutional interests than to alleviate the mounting pressures facing young Australians. As the bill teeters on the brink of collapse in parliament, questions remain about whether it offers a viable solution or risks deepening existing challenges.
International Students and the Housing Crisis
According to the APRI report, the proposed cap would add over 200,000 people to net overseas migration, creating significant demand for rental housing in Australia’s largest cities. Using census data, the authors calculated that Sydney would require an additional 21,119 rental properties and Melbourne 18,353 to accommodate incoming international students. This demand far exceeds the number of dwelling approvals for apartments and townhouses, which stood at just 13,792 in Sydney and 16,732 in Melbourne in 2023-24.
The rental market in Australia is already under severe strain. Record-high rents and low vacancy rates have left many Australians, particularly young people, struggling to find affordable housing. Opposition infrastructure spokeswoman Bridget McKenzie highlighted the disconnect between the proposed cap and the realities of Australia’s housing supply. She argued that young Australians are bearing the brunt of housing shortages and urban congestion while migration policies are being shaped by “vested interests” in universities, big business, and government bureaucracy.
Critics also note that international students account for a significant portion of net overseas migration—up to 55% in the years surrounding the pandemic. The relatively low rate at which international students return home after completing their studies further compounds the issue, as many transition to other visa categories or remain in Australia on temporary visas.
Policy Criticisms: Who Benefits?
The APRI report accuses the government of “capitulating to university and associated interests” by setting quotas for some institutions near their 2023 high-watermark enrolment levels. For major universities reliant on international student fees, these caps provide much-needed revenue stability. However, the policy’s broader implications reveal a misalignment with public concerns.
The proposed cap would allow regional and second-tier universities to maintain or grow their international student numbers while limiting enrolments at metro universities. While this redistribution aligns with the government’s stated goal of supporting regional development, it does little to address the broader issues of housing affordability and infrastructure strain in urban areas.
Education Minister Jason Clare defended the policy, arguing that it brings migration back to pre-pandemic levels and gives the government greater control over student visa numbers. Clare also emphasised the cap’s popularity, citing polls suggesting that 70% of Australians support limits on international students. However, critics argue that the policy prioritises optics over substance, failing to address the root causes of Australia’s housing and migration challenges.
The Genuine Student Test and Post-Study Visa Loopholes
The APRI report also highlights the challenges of ensuring that international students meet the “genuine student” test, a criterion designed to verify applicants’ intent to study in Australia and return home after completing their education. Ministerial Direction 107, introduced in December 2023, aimed to tighten these requirements, leading to a significant drop in student visa approvals for vocational and English-language courses in early 2024.
However, the proposed cap could undermine these efforts. By allowing universities to maintain high international enrolments, the government risks creating a system where the economic interests of institutions take precedence over migration integrity. The report warns of a growing underclass of “permanent temporaries,” composed of former students who exploit post-study visa pathways and appeals processes to extend their stay in Australia. This phenomenon not only strains public resources but also undermines public confidence in Australia’s migration system.
Universities and Economic Dependency on International Students
International students are a cornerstone of Australia’s higher education system, contributing $8.6 billion in tuition fees in 2022—more than one-quarter of total university revenue. For research-intensive institutions, these funds are critical to maintaining academic programs, infrastructure, and research output. However, this reliance has created vulnerabilities, as universities face mounting pressure to attract and retain international students to sustain their financial viability.
The proposed cap seeks to curb this dependency by limiting enrolments at metro universities. Yet, critics argue that the policy does little to address the underlying issues of funding and resource allocation. Australia’s spending on research and development (R&D) is already at historic lows, at just 1.68% of GDP—well below the OECD average of 2.7%. Without increased government investment, universities will continue to rely heavily on international student fees, perpetuating the cycle of economic dependency.
Balancing Migration, Education, and Housing Policies
The APRI report offers an alternative perspective, suggesting that the government focus on ensuring international students return home after their studies rather than cutting enrolments. Reducing post-study visa options and tightening the genuine student test could help manage migration levels without undermining Australia’s reputation as a global education hub.
Critics have also called for greater coordination between education, migration, and housing policies. Addressing Australia’s housing crisis requires bold action to increase the supply of affordable housing, particularly in urban centres. Policies that prioritise infrastructure development and urban planning alongside migration management could help alleviate the pressures facing Australia’s cities.
Is the Cap the Right Solution?
As Labor’s bill faces defeat in parliament, its critics argue that the proposed cap is a blunt instrument that fails to address the complexities of Australia’s migration and housing challenges. Focusing on enrolment numbers rather than systemic reforms, the policy risks exacerbating existing issues while offering limited benefits.
Instead of imposing arbitrary quotas, the government could explore more nuanced approaches, such as:
- Targeted Housing Investments: Increasing the supply of affordable housing for both domestic and international residents to ease rental pressures.
- Regional Development Strategies: Creating incentives for international students to study and remain in regional areas, reducing strain on major cities.
- Enhanced Migration Pathways: Ensuring that post-study visa options are aligned with genuine workforce needs while discouraging long-term temporary residency.
A Policy at Odds with Public Expectations
The Albanese Government’s proposed international student cap highlights the tensions between competing priorities in Australia’s migration, education, and housing policies. While the cap aims to address public concerns over urban congestion and housing affordability, its execution risks prioritising institutional interests over broader societal needs.
As the bill’s future hangs in the balance, the debate underscores the need for a comprehensive approach to migration and housing policy—one that balances economic growth with social equity and sustainability. Without such reforms, Australia risks perpetuating the very challenges this policy seeks to solve.
