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PC News - October 2015

International education services

International students make a significant economic and social contribution to Australia. However, a recent Commission Research Paper identifies a number of risks to the sustainability of Australia's international education sector.

The global market for education services is expanding as incomes and participation in education in emerging economies continue to rise. Australia is an attractive destination for international students at all levels of education. There is also a high demand for Australian education providers delivering courses abroad.

Following a period of rapid growth in the international education sector from 2007 to 2009 - partly driven by the direct pathway from the student visa program to permanent skilled migration - the sector experienced a major downturn from 2009 to 2011.

The high Australian dollar, the global recession, the introduction of a series of visa integrity measures, negative publicity about student safety in Australia, and uncertainty about college closures were key contributing factors.

The sector has since recovered from this decline and is back on a high growth trajectory. In 2014, the number of international students in Australia increased by more than 10 per cent on 2013 levels and education related exports also grew by a similar rate.

A number of factors contributed to this rebound.

These include the introduction of an expansionary student visa policy through streamlined visa processing (SVP), post study work rights, and improved economic conditions following the global financial crisis.

International students in Australia

    • International education services contributed $17 billion to the Australian economy in 2014.
    • Around half of this was from fees paid to educational institutions, with the remainder from expenditure on goods and services by international students living in Australia.
    • The sector represented about 27 per cent of services exports and close to 5 per cent of total Australian exports.
    • In 2014, there were over 450 000 international students onshore, representing around 20 per cent of higher education students and 5 per cent of students enrolled in vocational education and training.
    • Around three quarters of all international students enrolled in Australia in 2014 were from Asia, with China and India accounting for 37 per cent of all international students (26 and 11 per cent respectively).
    • Of the 160 000 enrolments in courses delivered offshore, more than two thirds were in the higher education sector.

Where are Australia's international students from?

  • Australia's top 10 source countries, 2014

Competitive pressures are intensifying

The four leading English speaking destination countries - the US, the UK, Australia and Canada - dominate the global market for the provision of international education services (IES), with market shares of 16, 13, 6 and 5 per cent respectively. While the US remains the top destination for international students, Australia and the UK have the highest concentration of international students in total national tertiary enrolments. International students as a proportion of total tertiary enrolments within Australia grew from 14 per cent in 1999 to 18 per cent by 2013. In the UK, the comparable share grew from 11 to about 18 per cent. International tertiary students as a proportion of total enrolments in the US has remained around 3 per cent over the period 1999 to 2012. In parallel with the growth in demand for international education, competition in the provision of international education is increasing globally. Many of the 'traditional' providers of IES are extending their international reach through the delivery of courses offshore. Further, many countries in Asia and in the Middle East are seeking to develop world-class capacity in higher education and research, and are investing heavily in higher education systems.

Whether Australia remains an attractive destination for overseas students will depend on how well education providers respond to students' expectations for their learning experience and provide a value proposition as technology and business models evolve.

The Commission report finds that the sustainability of international education is closely linked to regulatory settings around the quality of education and student visas.

Education quality regulation is a 'work in progress'

The quality and reputation of Australia's education services rank highly as a determinant of student demand.

Australia has a specific regulatory framework aimed at providing quality assurance and consumer protection for education services supplied to international students. This complements the regulatory framework that applies to the provision of domestic education services.

Two national regulators were established in 2011 - the Tertiary Education Quality Standards Agency (TEQSA) and the Australian Skills Quality Authority (ASQA).

The sector is interconnected and needs an integrated policy response

  • Policy and regulatory landscape for international education services

There are ongoing risks to the quality of some services provided by VET

  • Compliance with standard 15a found at audits of providers registered under CRICOSb to deliver VET

Stakeholder concerns about the quality of IES appear to be mainly confined to some segments of the VET sector.

These concerns stem partly from experience (namely, the emergence of poor-quality providers in the 2007-09 boom years) and partly from the nature of the sector (relative to the higher education sector), specifically:

  • the larger number of providers (around 500 registered to offer courses to international students, compared with 133 in higher education)
  • the prevalence of small scale operations and relatively short duration courses
  • lower barriers to entry and exit for providers.
Education providers' compliance with regulations aimed at managing risks to the quality of education services has improved in recent years Providers also seem responsive to regulatory intervention. However, ongoing risks to the quality of education services offered by some VET providers remain. In June 2014, ASQA reported that 33 per cent of all registered training organisations were rated as having a medium or high risk of their not complying with the relevant legislative obligations.

A rebalancing from teaching to learning standards is required

To be registered as a higher education provider or a training provider, organisations must satisfy standards related to provider characteristics and governance, qualification, information, and the quality of teaching and learning.

Within the teaching and learning standards category, the current quality assurance frameworks used by TEQSA and ASQA focus on input-based or teaching standards, such as the quality of teaching and the availability of supporting infrastructure.

Such standards are valuable as leading indicators of quality. However, given that student achievement is the ultimate goal of education, outcome-based or learning standards such as the demonstration of generic and discipline-specific learning objectives (including competency in the English language), are equally important from a quality assurance perspective.

The Commission report argues that the current emphasis on teaching standards should be rebalanced to provide for learning standards to have a greater role in quality assurance arrangements.

Better information to inform student choice

Information on courses for international students is available through various web portals hosted by government agencies, individual institutions, industry bodies and education agents.

While providers are required to supply students with information that will enable them to make informed decisions about their studies in Australia, national regulators are not required to make public other information that would assist students to make comparisons between providers.

The current regulatory regime also provides no publicly available information on the relative quality of education services offered by providers, or measures of comparative education outcomes such as completion rates or the distribution of levels of attainment for students completing their studies.

The availability of such information would offer greater transparency about the comparative 'quality' ranking of providers and would benefit prospective students - both domestic and international.

It would help counteract misleading information provided to international students by education agents, and may strengthen the incentive for individual providers to improve the quality of their education services.

The use of education agents is extensive and risky

Education agents are usually located offshore and work on behalf of a wide range of institutions across different countries, although agents also operate domestically.

They identify prospective students for Australian institutions (and institutions in other countries), provide students with information about courses, education providers and the features of living and studying in Australia (and other countries), assist students with enrolment applications (and visa applications where qualified), and sometimes collect course fees on a provider's behalf.

Educational institutions in Australia use agents extensively for recruiting international students, more so than in other comparable countries. And, on average, Australian institutions tend to pay higher commissions to agents relative to other countries.

Commissions paid on a per student basis on admission create incentives for agents to maximise the volume of international students, with little regard to the quality of the advice provided to students (affecting student expectations) or the quality and aptitude of the students.

Education agents can play a useful advisory and intermediary role for international students and can be a cost-effective option for institutions looking to recruit students across a range of countries (at least in the short-term). However the Commission received considerable anecdotal evidence that suggested unscrupulous behaviour of agents is an issue.

Like several other countries, Australia does not regulate education agents directly. The lack of a system for tracking agents and their clients' outcomes, the lack of transparency about provider-agent relationships, and the offshore location of many agents make the oversight of the conduct of agents challenging.

The Commission report suggests ways to mitigate these risks, including through internalising the risk and reducing the reliance on agents for recruitment through:

  • a more direct recruitment approach by flagship Australian education institutions targeted to the higher end of the value chain
  • greater transparency around the relationships between agents and providers
  • data systems that allow agent conduct and performance to be tracked over time
  • the provision of training and information exchange programs.

International Education Services

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