Why did universities become reliant on international students? Part 2: The cost of educating Commonwealth supported students

In a previous blog post, I argued that stagnating or declining government revenues encourage universities to seek additional international student fee income. By 2018, international student fees provided 26 per cent of all university revenue, up from 10 per cent in 2000.

However, I doubted that aggregate public funding levels fully explained university dependence on international students, whose numbers grow when public spending is increasing as well as decreasing.

But in thinking about how government policy affects university decision making it is not just revenue that matters. The cost of the services universities deliver for their public money is also crucial to understanding university behaviour.

A recent article in The Conversation suggested that government student-linked revenue did not cover the full cost of growth in student numbers. Another Conversation piece this morning also suggested that universities have become reliant on international student fee revenue to cover the cost of teaching, as well as research and other activities.

However, a chart in my first post shows that since the mid-2000s average per student funding for Commonwealth supported students grew by more than inflation and then stabilised in real terms, although with a small recent decline.

But one point made in response to my original post was that wages usually grow by more than general inflation. This means that my CPI indexation of revenue does not fully adjust for the changing purchasing capacity of grants, given the bundle of goods and services universities actually buy. In 2018, 56 per cent of university expenditure was on wages.

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