Australia has long benefited from the influx of international students, not just in terms of cultural diversity but also economically. International students are Australia’s third-largest export, contributing billions of dollars annually to the economy. By capping their numbers, the government is undermining one of its most valuable economic assets.
A Major Contributor to GDP
In 2019, before the pandemic disrupted global travel, international education was valued at nearly $40 billion in export revenue. Students from countries like China, India, Vietnam, and Nepal came to Australia for its world-class education and contributed to a wide array of sectors, from accommodation to retail and transportation.
- Education: International students contribute billions to the economy through tuition fees alone. Universities and RTOs rely on this income to fund research, infrastructure, and student services.
- Labour: International students are a critical part of Australia’s labour force, particularly in industries facing chronic worker shortages. From cafes to aged care facilities, they fill roles that local workers often cannot or will not take.
- Housing: The demand for rental properties, particularly in areas surrounding major universities, has been driven largely by international students. This demand has helped stabilise the housing market and has been a source of income for property investors.
Undermining Global Competitiveness
By capping student numbers, Australia is sending a signal that it is no longer a welcoming destination for international students. This will have long-term consequences for the reputation of Australian universities and RTOs, which have historically attracted students from around the world.
Countries like Canada, the United States, and the United Kingdom are competing fiercely for the same pool of students, offering more streamlined visa processes, post-graduation work opportunities, and migration pathways. Australia risks losing its competitive edge by implementing policies that restrict access and create uncertainty for potential students.
Labour Shortages Will Worsen: The Supply Side Crisis
While the cap on international students may temporarily ease demand for housing and services, the RBA’s warning is clear: it will severely hamper Australia’s supply capacity. The country is already facing labour shortages in critical sectors such as aged care, hospitality, and construction. International students provide essential labour in these industries, and their reduced presence will exacerbate the crisis.
Aged Care and Healthcare
Australia’s aged care and healthcare sectors are already experiencing significant worker shortages. International students, many of whom are training in healthcare-related fields, often work part-time in aged-care facilities, hospitals, and clinics. These students provide a valuable service while gaining experience that will be critical when they enter the workforce full-time.
By capping international student numbers, the government is effectively cutting off a key supply of future healthcare workers—at a time when the sector is under enormous pressure due to an aging population and rising healthcare needs.
Hospitality and Retail
The hospitality and retail sectors have long relied on international students to fill casual and part-time roles. Many small businesses depend on these workers to keep their doors open, especially in tourism-heavy areas where local labour is often insufficient.
Reducing the number of international students will leave many businesses struggling to fill these roles, likely leading to shortened hours, reduced services, and closures. The RBA’s warning that the cap will shrink the economy’s supply capacity is particularly relevant here, as the ripple effects will be felt across the entire economy.
How Will the Cap Impact Housing? A Double-Edged Sword
One of the justifications for the student cap is that it will ease pressure on the housing market, particularly in major cities where rental prices have soared in recent years. While it is true that fewer international students may lead to a temporary decrease in demand for student accommodation, the broader implications for the housing market are more complex.
The Risk of a Housing Slump
International students drive demand for rental properties, particularly in areas close to universities and colleges. This demand has helped stabilise rental markets and has been a key source of income for property owners and investors. By capping student numbers, the government risks destabilising the housing market, particularly in regions where rental vacancies are already low.
Landlords may face difficulties filling properties, leading to a decline in rental income and potentially housing market stagnation. This could result in fewer new developments, as developers hesitate to invest in student accommodation or rental properties without a steady demand.
The Broader Impact on Small Businesses
Small businesses across Australia are bracing for the impact of the student cap. International students are not only employees but also consumers who spend money on everything from groceries to clothing to transportation. Their absence will leave a noticeable hole in local economies, particularly in cities like Melbourne and Sydney, where international students make up a significant portion of the population.
Many small businesses, particularly those in hospitality, have expressed concern that they will struggle to stay afloat without the workforce and customer base provided by international students. With labour shortages already impacting these sectors, the student cap threatens to further exacerbate the problem.
The Time for Rethinking is Now
The RBA’s warning could not be clearer: the cap on international students is a short-sighted policy that will damage Australia’s economy in both the short and long term. It will reduce demand and labour supply, shrink the economy’s capacity to grow, and put pressure on businesses across multiple sectors.
Policymakers must act now to rethink this legislation before it is too late. Australia cannot afford to lose the economic benefits that international students bring, nor can it afford to ignore the labour and housing crises that will only worsen if this cap is implemented.
The time for action is now. Australia’s future prosperity depends on it.
