Why did universities become reliant on international students? Part 3: The rise of research project grants

In a previous post, I doubted that inadequate public funding for Commonwealth supported students could, with a few exceptions, explain why universities have enrolled so many fee-paying international students. For publicly-funded research, however, structural changes in how funding is delivered have changed its economics.

Government policy has moved away from block grant funding – lump sums of money that universities can spend as they choose – towards project funding awarded on a competitive basis, mainly through the Australian Research Council and the National Health and Medical Research Council.

In the 1990s, as the chart below shows, competitive grants made up less than a quarter of Commonwealth research spending on universities (counting Department of Education plus NHMRC). By the middle of the 2010s nearly half of Commonwealth funding was delivered through competitive grants, though with an easing off recently as ARC funding was cut.

With block grants research funding is largely self-contained; universities do what they can within their overall funding envelope. In the early 1990s total research expenditure by universities was only modestly above Commonwealth government research support.

But project grants do not usually cover the project’s full costs. For ARC project grants it is standard practice to not fund the salaries of academic project leaders, or to fully fund other costs.

Funding for ARC projects does not cover indirect costs associated with using university laboratories, IT, libraries and other facilities and services shared between research projects (and teaching). A report a decade ago suggested that these could be 90 per cent of the direct costs in some institutions.

These unfunded direct and indirect costs are partly offset by research block grant programs, principally the Research Support Program and its predecessors. RSP funding for each university is linked to its success in winning competitive grants.

But the RSP is too low to cover these direct and indirect costs, and it has become less sufficient over time. As the chart below shows, RSP funding is currently equivalent to a much lower percentage of Commonwealth competitive research income income than its predecessor programs were in 2001, despite lifting off its early-to-mid 2010s low point due to the ARC funding cut.

A policy of part-funding government sponsored research projects means that even though receiving a grant increases the total amount a university can spend on research, the revenue it brings in is less than the project’s total cost.

Part-funded research projects create a need for universities to find research money from other sources. Student-driven Commonwealth funding was assumed to be part of this. Until 2004 the operating grant used to support teaching was, as stated in the then funding legislation, expressly for teaching and research.

On 2018 teaching cost data, the profits from teaching Commonwealth supported students are skewed towards the scientific and engineering fields that get the bulk of ARC funding. That funds some of what the RSP does not.

However, I doubt that profits on domestic students solve the problem of under-funded research projects. The profits are spread across the sector, while 60 per cent plus of competitive government-funded research projects are carried out in Group of Eight universities, which enrol about a quarter of Commonwealth supported students.

It can’t be a surprise that Group of Eight universities have turned to the international market to plug the funding gaps on competitive grant projects. In 2018, they earned 52 per cent of all international student fee revenue on 41 per cent of full-time equivalent enrolments, reflecting their relatively high fees.

The COVID-19 crisis in international education is exposing weaknesses in how we organise and fund research. The next post looks at how teaching-research academics are financed.


6 thoughts on “Why did universities become reliant on international students? Part 3: The rise of research project grants

  1. Thanks for this series of posts. It confirms that Go8s in particular run on a maze of cross-subsidies. And that many Go8s have lifted their share of international enrolments to finance more research, climb global rankings etc. There is still the question of whether most international student surpluses are spent on the need to plug funding gaps built into competitive grants, or whether much of it goes to otherwise unfunded research projects, or other “overhead” costs and capacity building programs. Are you able to quantify this aspect? Clearly more direct funding helps. But since universities have an “infinite mission, finite means” budget dilemma built into their DNA, there will be “always never enough’.


  2. Geoff – I am not sure whether I will be able to quantify it, but there are a couple more posts to go on the relationship between research and international students.


  3. good analysis Andrew. to extend the thought: an aspect of competitive grants you don’t mention is their extraordinarily high transaction costs, primarily for academics in writing applications. The success rate is low and the average time taken huge. This has to be paid for somehow. A decade ago I led the economic team for the sceince/economic evaluation of NCRIS; something to admire about that scheme, in addition to its encouragement of collaboration and resource sharing, was that its transaction costs were so much lower than other grants programs.

    Liked by 1 person

    • I am in the process of applying for an ARC grant. It will have some value for me in helping me to understand the process regardless of outcome, but multiply this by many thousands across the sector every year and yes you have a significant point.


  4. Andrew – does your graph of the research support black grant include RSP and RTS. I’ve only ever considered RSP as support for government sponsored research and RTS more about capacity building. RSP at approx 20% of direct costs is well below international (UK and US) standards of around 80%. What chance do you think there is of Tehan’s new research review increases RSP to internationally competitive levels?


  5. RTP is in the first chart, but RSP only in the second chart. I could be wrong, but my impression is that RTP money is distributed more evenly within unis than competitive grant money, and based on some research I found more likely to cover costs.

    As for your question, chances are close to zero.


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