It's time to rethink the overseas student program

The problem was partly the Coalition government stomping on the immigration accelerator before we were ready for it (I wrote about the risks of that in October 2021) and partly the Albanese government responding far too slowly to booming demand and a range of long-standing integrity/quality issues.

Despite the generally very good measures taken by the Albanese government in the second half of 2023, offshore student visa application rates continued at record levels driven by accelerated demand associated with COVID-era policy settings, a very strong labour market, pathways to record levels of permanent migration and now the impact of competitor nations such as the UK and Canada tightening policy much more dramatically and in a much more blunt way.

To drive down student contribution to booming net migration, the government has also been refusing offshore student visa applications at record levels and slowing visa processing (ie the backlog is again growing).

That is unsustainable as it puts enormous pressure on visa processing staff and creates massive uncertainty for the industry.

The table below highlights the dramatic rise in offshore student applications with new records being set in just about every month since February 2022.

In 2022-23, the Albanese government increased offshore student refusal rates somewhat and increased these even further from August 2023.

In December 2023, only 22,643 offshore student visas were granted due to a combination of a record high refusal rate and slow processing leading to a growing backlog. That compares to 29,738 visas granted in December 2022.

In 2023-24, Australia will refuse more student visas than in any previous year - by a very long way.

That represents long-standing poor visa design and poor policy. In the first six months of 2023-24 financial year, the Albanese government has granted 139,132 offshore student visas compared to 166,931 visas in the first six months of financial year 2022-23.

That was despite a much higher application rate in the first six months of 2023-24.

The government will be hoping this reduction in offshore visas granted will contribute significantly to reducing net migration from over 518,000 in 2022-23 to its forecast of 375,000 in 23-24 - a reduction in net migration of over 143,000 and then down to 250,000 in 2024-25.

But the measures taken to date may not be enough to get net migration down to these levels given that net permanent and long-term movements in the first five months of 2023-24 were over 90,000 higher than in the same period of 2022-23.

To drive down the offshore student visa application rate, the government will be relying on an increased English language requirement (which in turn relies on the rigour of English language testing) and a tightening of requirements for the temporary graduate visa.

The risk is that these measures will not sufficiently reduce offshore student visa demand in the way the UK and Canada have. While the key measures taken by the UK (ie no dependents of student visa applicants other than research students) and Canada (an arbitrary cap to be designed by each province/territory) are poor policy, the Albanese government should not be panicked into something similar.

A better approach would be to use university entrance exam results in source countries to discourage low performing students from applying while encouraging high performing students.

That would be using highly objective criteria that gives clarity to industry, enables government to adjust score requirements to ratchet demand up or down as needed and truly targets the brightest and best who have an interest in doing courses that are in demand in Australia.

Fundamentally, why are Australian universities accepting overseas students who would struggle to get into a high quality university in their own country? This seems to also be an issue in the UK.

Finally, it is time that the government addressed the question of what is the primary purpose of the overseas student program.

Is it primarily about fee revenue for universities in which case the universities may have relatively little regard to targeting high performing students?

Or is it primarily about recruiting future Australian citizens given around 25 percent of the migration program is comprised of former overseas students?

If it is primarily about the former, a question all governments need to address is who is responsible for the costs of large numbers of students being left in immigration limbo given that these costs are currently not borne by universities but by the taxpayer?

If it is the latter, and in my view it should be as the benefits of targeting high performing students to become future citizens is far greater than the revenue universities generate, then governments would need to undertake a major re-think of the design of student visas and pathways to permanent residence.

That would be far better than the panicked approach taken in the UK and Canada and the high refusal rate strategy being used by Australia.