The phenomenal rise of international degrees down under Lucrative lessons of U.S. Institutions?

The phenomenal rise of international degrees down under Lucrative lessons of U.S. Institutions? – Australia

Simon Marginson

Question. Which education market has grown by an average of 15 percent every year since the late 1980s?

Answer. International education in Australia.

Question. Which nation has gone from a minor provider of foreign education to the third largest in the world in a decade?

Answer. Australia.

Question. Where is nearly one student in five a full-tuition-paying foreign student?

Answer. Yep, it’s Australia again.

The United States is still the world’s largest provider of education for foreign students, followed by the United Kingdom, Australia, France, Germany, and Canada. But the United States sustains this role largely because of its size and its worldwide economic and cultural leadership. International education is marginal to the core operations of most American universities, as a recent study by Fred Hayward for the American Council on Education (see Philip Altbach in this issue) points out. The United States has 17 times the population of Australia but only four times the number of foreign students. When offshore numbers are included, foreign students now comprise 18 percent of the total enrollment in Australia, compared to 3 percent in the United States.

When the demand for English-language education mushroomed in the 1990s in the wake of globalization and its growing rewards for mobile business and information technology (IT) degrees, Australia and the United Kingdom caught the wave. The United Kingdom had adopted an aggressive and commercial approach to international education in the early 1980s. But no one predicted such explosive growth in a country with a longitude in the Far East–or that Australia’s international education would keep growing right through the Asian crisis of 1998. Foreign students see Australia as safe, secure, reputed to be relatively tolerant (though its immigration policies can belie that reputation), and cheaper than its English-language rivals: the United States, the United Kingdom, and Canada.

And Australian education is reaching across the water. It outdraws the United States in Southeast Asia. It is a serious player in China, which is emerging as the largest education market in the world. It is already the biggest provider of foreign education to “little dragon” Singapore, which has busily reinvented itself as a knowledge economy. Education, the fifth-largest services export in the United States, is third-largest in Australia. And in World Trade Organization negotiations on the General Agreement on Trade in Services (GATS), both the Australian and U.S. governments are calling for further liberalization of trade in cross-border education.

In American universities, international education is run more as a source of intellectual labor, a branch of foreign aid, or an exercise in cultural exchange than as a revenue-generating program. Down under, it’s very different. Foreign students have become crucial to the resource base of many Australian universities. International education provides more than 10 percent of the average revenues of Australian institutions–at one large university, the Royal Melbourne Institute of Technology, it provides one dollar in every four–and is run as a business. With state governments cutting back funds for public education, the United States might be propelled in the same direction as Australia. International education could offer middle-ranking U.S. universities–those that lack the resources of their elite peers but are strong enough to draw foreign student business–a potentially lucrative source of cash.

If the United States goes in this direction, the Australian experience might contribute valuable lessons. For while the often feverish growth of international education has been a triumph for the entrepreneurial spirit, it has been more of a mixed blessing for higher education. The very scale of the operation carries problems. And as every addict knows, once patterns of dependence become established, they are hard to break. Foreign student demand is concentrated in certain courses and certain institutions, and it comes from a relatively narrow range of supplier countries. Perhaps most worrisome, foreign student revenues have made possible a further decline in government funding, which has put quality under pressure. In 1986, the Australian government provided 85 percent of funding for higher education. It now pays 48 percent.


How did Australia do it? The short answer is policy, management, and circumstances. Education policies so rarely achieve their objectives that when one does–ahead of time and over target–it is worth noting how it was done. In the late 1980s, as part of a larger overhaul of higher education, the Australian government created an export industry from zero by

* setting tuition charges high enough to ensure full-cost recovery and, later, deregulating foreign-student fee schedules and allowing institutions to determine their own prices;

* changing the rules to allow universities to retain their earnings without penalty;

* allowing universities to enroll as many foreign students as they wished (while continuing to plan and limit the number of government-funded local students, who pay deferred tuition);

* reducing the level of public funding of universities and so forcing the search for alternatives (between 1985-1986 and 1989-1990 government funding per student fell by 40 percent in real terms, with another 25 percent cut in the second half of the 1990s);

* encouraging the emergence of a more entrepreneurial style of management through a variety of statements, schemes, and incentives;

* coordinating recruitment in Southeast Asia, mobilizing Australian embassies to help in this effort; and

* developing standardized degree structures and nomenclature and, later, funding a national program of quality assurance.

The driving force behind the foreign-student recruitment boom was the structure of financial incentives. Universities gained new freedom to recruit fee-paying foreign students just when they found themselves critically short of cash. At the same time, there was no conflict between the growth of international education and domestic student numbers, since the two groups were financed on a different basis. Despite faculty resistance, entrepreneurial leaders/managers moved surprisingly fast. Soon, a pattern of dependence was established: international education became the main source of discretionary revenues and began to substitute for core funding.

East and Southeast Asia became the recruitment targets. The universities were strongly encouraged by the then-Labor government, which notwithstanding Australia’s British origins saw its economic future in the countries to the north. The Liberal-National Party government, elected in 1996, later abandoned the commitment to “Asianization,” but by then the export industry was firmly established.

The need for regulation and quality-assurance mechanisms became apparent early on. The regulatory framework was originally liberal, but it was tightened up when the market faltered. After a chain of private colleges collapsed at the beginning of the 1990s, there was legislation to guarantee student fees and return tickets.

In the early stages there was much negative marketing: universities, and sometimes different schools from the same universities, vied for advantage by disparaging each other. While policy encouraged competition between universities, coordinated recruitment and a code of conduct put a stop to such behavior.

Problems with agents in source countries were harder to deal with. In the beginning, student services and English-language aid were often poorly designed or nonexistent, but universities soon learned that it was crucial to focus on student welfare, particularly in the case of younger students.

Policymakers and educators learned from their marketing mistakes as well. Market research found that an overly commercial approach to learning generated resistance, particularly among Chinese families. So in 1993 the federal government shifted the policy rhetoric of international education, focusing on the benefits of diversity, global mutuality, cultural exchange, and across-the-board internationalization.

The program’s underlying financial incentives were unchanged, and it was some years before the new emphases generated changes in the curriculum. Nevertheless, the rhetorical turn was important, not only because the new approach was more effective for recruitment but because it co-opted the many faculty and student-service officers who were motivated primarily by cultural rather than economic objectives.

In the second half of the 1990s there were concerns that the absence of a credible national system of quality assurance would harm the global standing of Australian universities, and in late 1999 the government announced a national system of accreditation and quality assurance based on rigorous control over the title “university,” institutional self-assessment, and a five-year audit cycle. The quality audit is not as interventionist as in the parallel British system, but in a competitive environment, public disclosure of the outcomes is a strong pressure on institutions. Again, the Australian authorities balanced policy intervention with a market approach.

The Australians were also favored by circumstances. First, though American and British education enjoyed a greater prestige, Australia was closer to Asia. Second, and decisively, Australian higher education was cheaper than American and British higher education. As the 1990s proceeded and the dollar and sterling strengthened vis a vis other currencies, and the relative value of the Australian dollar collapsed, this price advantage widened. One effect of the Asian crisis was that Australia expanded its market share as students shifted their enrollment from the United States and the United Kingdom to the cheaper Australian institutions.

The price advantage has persisted. The Australian dollar is currently at 51 cents American. A recent survey by the Australian department of education found that the tuition of an Australian MBA is only half the American public university average, and average living costs are 70 percent of United States and United Kingdom levels. Australia also offers an opportunity-cost advantage: its baccalaureate degrees and PhD programs are three years long, compared to four years in the United States, and the master’s coursework has been shortened from two years to little more than one. A market advantage that is based on providing less education has its limits, but there is no denying that this has encouraged growth.


In the year 2000 there were 188,277 foreign students studying in Australia: 57 percent in universities, 20 percent in specialist English-language colleges, 16 percent in vocational colleges, and 7 percent in schools. More recent data are available for university-level education. In the second half of 2001, there were 143,788 foreign students. Nearly all were enrolled in public universities (the private sector plays a minor role in Australia) of which 91,285 were on campus in Australia, 39,616 were on campus in other countries, and 12,887 were distance-learning students offshore. (Australian regulations prevent foreign students living in Australia from enrolling in predominantly distance-learning programs.) These students are distributed unequally among the universities, representing from 29.2 percent to 2 percent of the total student body.

Foreign students located outside Australia are increasing faster than those inside. They include students at Australian campuses in Malaysia, Vietnam, Fiji, and South Africa, as well as those attending partner institutions that provide education on behalf of an Australian institution (“franchising”) or the first year or years of a degree subsequently finished in Australia (“twinning”).

Meanwhile distance learning grew by 25 percent last year. Traditional print-based distance learning, electronic communications, and Web-based materials are all widespread, while a growing number of courses use interactive Web sites. Most of this is “supported” distance education: students have access to facilities at study centers or undergo short periods of intensive teaching in partner institutions. Only one percent of programs are purely E-based.

Last August the World Bank and the Australian government agency Ausaid announced plans to collaborate in a five-year, $1.5 billion program to develop and provide cross-border distance learning in Asia, Africa, and the Pacific. There are formidable problems to overcome before this ambition is realized, such as the need for communication systems, viable local partnerships, and course content and technologies tailored to local circumstances.


Australia’s foreign student enrollments vary not only by place and mode of instruction but by discipline. More than two-thirds of all international graduates are in business and IT. In vocational master’s programs in business, the fastest-growing area of Australian higher education, one student in two is foreign. Other areas of strength are engineering, and architecture and building.

The number of foreign graduates in other disciplines has grown more slowly. Demand is relatively low in health and education, because these fields require nation–specific qualification or-as in the case of medical degrees-because quotas restrict student numbers.

Because the number of local students actually fell between 1999 and 2000, overall patterns of growth have a decidedly lopsided look.

Unsurprisingly, attitudes on campus towards internationalization are colored by people’s disciplines. The massive increase in full-fee revenues in business and IT has left many schools awash with surpluses, while others remain largely dependent on the now-shrinking base of public funds and are struggling. “We’ve so much money that we don’t know what to do with it,” says a professor of information systems at one of Australia’s biggest universities. His colleagues in the belea-guered arts and sciences schools would not find it hard to think of something.

Another imbalance has been created in graduate education, where the growth of vocational graduate programs for foreign students–which are cheap to consume and provide–has out-stripped that of research programs. Critics call this shift to master’s education the “dumbing down” of Australia’s international education. They point to the historical contribution made by foreign students to research in science and engineering, and the growing importance of these fields in the global knowledge economy.

The financial effects of this shift on those disciplines may imperil, indeed, Australia’s capacity to compete in that economy. In Australia as in America, doctoral education is shaped by the pattern of fellowships and other subsidies. In orchestrating the transition to a commercial market in international education, the Australian government reduced foreign fellowships.

Graduate research, heavily dependent on subsidization, has thus disproportionately suffered from the adoption of market principles. On the other hand, some institutions, notably the University of New South Wales in Sydney, maintain a strong focus on foreign student research by cross-subsidizing it from other revenues. But only universities with both strong research programs and large international programs with economies of scale can execute this strategy.


In a growth-fixated culture like those of Australia and the United States, an economic boom often conceals its flaws and limitations. Australia’s main problems lie in the tensions between commercial and educational objectives, and have been exacerbated by a period of declining public resources that has forced universities to choose between their older function of producing public goods and the new focus on marketable products.

Dollars generated by the education of foreign students are not applied to the same purposes as the public funding that they ostensibly replace. Rather than going to teaching and research, much of the money is ploughed back into the costs of doing business: marketing, recruitment, offshore operations, executive salaries and travel, communications, fund-raising, asset and financial management, and quality assurance. Although all Australian universities have become dependent on it to sustain their infrastructure, many fail to profit from international education. One study found that only six institutions were operating on a large enough scale to benefit. (The study was suppressed.)

For most institutions in a competitive market, there is little scope for cross-subsidizing academic disciplines with fewer international students. The reduction of resources for teaching and research has rendered Australian universities more fragile than before. They are still living off a reputation garnered in the heyday of public funding in the 1970s and 1980s, when their strong research programs were built. They now have a quality problem (and quality assurance does not conceal it). Across the system the average student-staff ratio has risen from 13-to-1 in 1989 to 18-to-1 in 1999.

At the same time, there are questions about the extent to which international education fosters the larger public goods featured in the marketing rhetoric, particularly cultural exchange. Regardless of its commercial character, one would assume that foreign-student education on this scale must enable significant student mixing, which over time will strengthen Australia’s engagement with the source countries.

However, research evidence suggests that the cultural engagement is largely unidirectional. A study by Don Smart, Simone Volet, and Grace Ang at Murdoch University in 2000 found that there is “a fairly strong separation between the local Australian and international students.” Australian students expect international students to adjust to them, not vice versa. This disappoints the international students who, in many cases, anticipate establishing friendships with local students.

The same one-way pattern is apparent in study-abroad and student-exchange schemes. In the second half of 2001, the number of students coming into Australia was 3.65 times the number of outgoing students. As in the United States, programs encouraging local students to go abroad have fallen short of expectations. And when Australian students do go abroad, they mostly head off to Europe and America rather than to the source countries of Asia.

The international program, in short, has yet to challenge deeply rooted assumptions about cultural homogeneity. Like American colleges and universities, Australian higher education remains essentially monocultural in form and AngloAmerican in content. Curricular reform has focused mostly on the inclusion of more foreign or global examples. The deeper pedagogical consequences of a large international student population have yet to be faced on most campuses.

Some faculty believe the classroom must be a level playing field in which no student receives distinct treatment or extra resources. Others who hold that teaching must respond to the particular needs of each individual often lack the resources to do this. Cultural myopia also affects online programs. How can culturally sensitive online pedagogies be created, and what form might they take? Cultural diversity here would be both smart commerce and good teaching.

Australia’s cultural and linguistic parochialism undercuts another claim of the marketers of international education: that it promotes across-the-board internationalization. Up until now Australia’s foreign-student population has been drawn heavily from middle-class Chinese families, particularly from the Chinese diaspora in Southeast Asia. Students from these countries are relatively competent in English and, like Australia’s, their education systems have been shaped by British colonization. Such students are readily slotted in to Australian universities without much change to curriculum and pedagogies.

But Australia’s dependence on Malaysia, Singapore, and Hong Kong will turn out to be an increasing handicap if these areas–mindful of the foreign exchange cost of education imports–follow through with plans to expand their own domestic higher education capacity. (Malaysia wants to become a net exporter in Asia.) Australia’s engagement with a deeper internationalization–for example, the creation of an administrative capacity in foreign languages and the more widespread use of bilingual instruction–has been postponed. Nevertheless, bilingualism plays a role in offshore programs–for example, with the use of Mandarin and English in business courses offered in China.


So, while the numbers are impressive, Australia’s position in the international student market is not as robust as it looks. It rests on vocational training in business and IT, and it does not strengthen research reputation. Areas where Australian research is strong in world terms (plant and animal sciences, earth sciences, medicine, some biosciences, astrophysics, education) are largely decoupled from the education of foreign students–in contrast to the situation in the United States, where much of the foreign student component is concentrated in graduate research. In this area, Australia provides little competition to the United States.

Further, while international education has generated much-needed resources, it has failed to contribute to the national character of Australian higher education. In concentrating on business and IT, taught in a generic English-language mode, Australia is producing American education cheaper than America does itself. This leaves Australia vulnerable to a change in the economic settings–for example, a sharp depreciation of the American dollar–because it lacks a distinctive product that will hold custom when the price changes.

If American universities become serious about foreign-student revenues and begin to recruit as aggressively as Australia, they will grab some of its business. For globally inclined business and IT students, the United States offers more opportunities and higher prestige. If that happens, Australia may well become more dependent on the factors that distinguish it from most countries, such as its civic safety and tolerance, its climate and beaches, its space and landscapes.

In the first wave of internationalization in Australia and also the United Kingdom, entrepreneurship and marketing were used to secure time, presence, and market share, the fruits of initiator’s advantage. In the second wave of internationalization, competitors will muscle in and the tasks become more complicated. Canada is doing this now; the United States may follow. In the longer term, Australia will need to diversify its source countries, broaden the engagement of the disciplines it offers (particularly in the sciences), and underpin foreign-student education with global mutuality and greater linguistic and cultural depth. It also needs to arrest the downward pressures on quality, for which task government reinvestment is essential. Australia’s capacity to sustain a leading role in global education will depend on the achievement of a more sophisticated and productive balance between its commercial and educational objectives.

There are lessons here for the United States. If Americans develop a more commercial take on internationalization, and this plays out at the expense of the cultural and educational objectives that dominate foreign-student education in the United States today, there will be a price to pay. It will be necessary to reinvent those objectives later.

This is the task Australia now faces. Still, Australian universities have proved to be highly resourceful and adaptable in the last 15 years, and they will likely rise to the challenge.




% Growth of International % Growth of International

Onshore Students Offshore Students

1995 12.5 30.8

1996 17.9 13.9

1997 13.1 29.8

1998 7.4 38.2

1999 7.2 30.8

2000 19.4 18.4

2001 16.0 13.7

% Growth of All


1995 16.0

1996 17.0

1997 16.6

1998 14.7

1999 13.9

2000 19.1

2001 15.1

Source: Australian government, Department of Education, Science, and





University International All

Students Students

Royal Melbourne Institute of

Technology 9,035 30,962

Monash University 8,852 41,648

University of New South Wales 6,491 31,498

Charles Sturt University 5,223 27,909

University of Melbourne 4,902 33,362

Curtin University of Technology 4,249 21,622

University of South Australia 4,116 24,738

University of Sydney 3,695 35,121

Central Queensland University 3,313 13,750

University of Western Sydney 3,117 28,873

University International Students

as a Percentage

Royal Melbourne Institute of

Technology 29.2

Monash University 21.4

University of New South Wales 20.6

Charles Sturt University 18.7

University of Melbourne 14.7

Curtin University of Technology 19.7

University of South Australia 16.6

University of Sydney 10.5

Central Queensland University 24.1

University of Western Sydney 10.8

Note: (*)Not all offshore enrollments associated with the universities

are included–for example, students in “twinning” programs that are

enrolled in partner institutions. From Australian government data.





Business, Economics and Law 24.9

Computing and Mathematics 21.6

Engineering 18.5

Architecture and Building 16.8

Humanities 9.8

Health Science 8.8

Visual and Performing Arts 8.2

Agriculture 7.2

Physical and Biological Sciences 7.0

Social Sciences 6.3

Education 3.6

All Fields 14.4

Note: (*)”Student load” mneasures full-time-equivalent student numbers.

From Australian government data.




Percentage of All International Student Graduates With:

Research Degrees Coursework Master’s Degrees (*)

1988 8.1 7.6

1989 6.0 6.4

1990 6.9 13.6

1991 7.1 13.2

1992 6.6 14.6

1993 7.3 14.9

1994 7.4 15.0

1995 6.1 16.3

1996 4.9 20.6

1997 4.4 23.9

1998 3.5 25.1

Note: (*)Coursework Master’s Degrees are vocational master’s level

courses with no dissertation requirement, typically 1 to 2 years of

full-time study. From Australian government data.



Distance Education in the Countries 12,887

On Campus in Other Countries 39,616

On Campus in Australia 91,285

Total students 143,788

Note: Table made from pie chart




1995 1999

International Student Graduates:

Business Studies 6,342 15,191 139.5%

All Other Disciplines 7,580 13,072 72.5%

Total 13,922 28,263 103.0%

Domestic Student Graduates:

Business Studies 23,622 31,123 31.8%

All Other Disciplines 103,449 105,037 1.5%

Total 127,071 136,160 7.2%

Notes: (*)Include IT. Once IT is excluded, graduates in this category

fall significantly. From Australian government data.

Note: Table made from bar graph

Simon Marginson is a professor of education at Monash University in Melbourne, Australia. He is the editor of The Australian Journal of Education and director of the Monash Centre for Research in International Education. His books include Markets in Education (Allen and Unwin, 1997) and The Enterprise University (with Mark Considine, Cambridge University Press, 2000), which won the American Education Research Association’s Outstanding Publications award for books on higher education. In March he received the Comparative and International Education Society’s George Bereday award.

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