Australia’s Education Sector Faces Big Changes with Immigration Limits

Key takeaways

The influx of people arriving in Australia, either as permanent residents or temporary visitors here for work or study, has kept inflation high and made it harder for the Reserve Bank to reduce inflation by cutting overall consumer demand.

Both Prime Minister Anthony Albanese and opposition leader Peter Dutton are posturing over immigration numbers post-election. The Labor Party wants to reduce net migration to 235,000 over the next three years.

According to NAB's economics team, curtailing student migration would significantly impact Australia's economy. New student enrolments could drop to levels unseen for two decades.

The government may need to bring back students quickly to manage wage pressures and inflation, but reducing the number of foreign students may help curb inflation.

Australia’s $48 billion education industry, our fourth-largest export sector, is about to take a significant hit, and it's all tied to three main reasons: inflation, housing pressures, and the upcoming election.

You see…despite 13 interest rate hikes, one of the key drivers keeping inflation high is the influx of people arriving in Australia—either as permanent residents or temporary visitors here for work or study.

The pandemic taught us just how much we rely on these international students and workers.

When 500,000 of them went back home during the global lockdowns we struggled.

Remember those signs in the windows of almost every coffee shop and restaurant desperately looking for baristas and wait staff?

Now that all the students have returned, their demand for goods and services has kept the economy turning over and in turn, has kept inflation high.

Obviously, the spending by over half a million people who came to Australia last year makes it harder for the Reserve Bank to reduce inflation by cutting overall consumer demand.

Now, both Prime Minister Anthony Albanese and opposition leader Peter Dutton are posturing over immigration numbers post-election.

Here's what each side is proposing:

• Peter Dutton wants to cut net temporary migration to 160,000, with only 10,000 to 15,000 overseas students allowed in each year. The AFR reports this could shrink Australia’s fourth-largest export sector to under 5% of its pre-pandemic size, which was about 244,000 students.
• The Labor Party plans to reduce net migration to 235,000 over the next three years, allowing for around 95,000 student arrivals annually—about 40% of pre-pandemic numbers.

Yes, we're in an election year and we’ll be getting a lot of political promises, but the suggestion of strongly curtailing student migration will significantly impact our economy.

According to NAB’s economics team reported in the AFR, international students contributed to more than half of Australia’s economic growth in 2023, equivalent to 0.8 percentage points of annual GDP growth.

If both parties stick to their plans, new student enrolments could drop to levels unseen for two decades.

Reducing the number of foreign students may help curb inflation by cutting demand, but it will also drive up costs for businesses that rely on students for staffing.

This complex balancing act might mean that the government will need to bring back students quickly to manage wage pressures and inflation.

In the end, economics is never as straightforward as politicians make it out to be, and these changes could have far-reaching implications for Australia's economy.

About Chris Dang Chris Dang is an accountant by training and has worked in the Financial Planning industry for many years. Chris brings together property, accounting, and financial planning experience to help clients of Metropole Wealth Advisory create a holistic plan for their wealth.