Australian universities lose financial breathing space

Sector surpluses dip below 5 per cent ‘buffer zone’ threshold

December 11, 2018
End of the line

Australia’s higher education sector has slid further towards insolvency, despite banking a A$1 billion (£574 million) pay rise from international tuition fees, a new regulator’s report suggests.

The average surplus for the nation’s universities has fallen below the 5 per cent figure, considered an essential buffer to ensure that institutions have the reserves to cover maintenance and capital replacement costs.

Universities’ average surpluses have slipped from 5.5 per cent to 4.8 per cent. And the picture for the broader higher education sector is worse, with the margin having slipped to just 4.1 per cent – down from a relatively healthy 5.9 per cent in 2015.

The figures come from the Tertiary Education Quality and Standards Agency’s latest Key Financial Metrics report, which covers the period from July 2016 to June 2017.

The report shows that not-for-profit non-university higher education providers were finding it tough, with about half recording deficits in 2016-17.

The situation was even worse for state-owned vocational education institutions that also provide degrees. Of these, almost two in three incurred deficits in 2016-17.

The analysis found that dual-sector colleges were generally less profitable than providers operating exclusively in higher education, reporting lower median net surpluses and spending a higher proportion of their earnings on staff.

Overall, expenses exceeded revenue at 30 per cent of higher education providers. This occurred despite a A$7 billion (£4 billion) windfall from international education, A$1 billion more than in 2016.

The growth in foreign earnings failed to keep pace with the increase in staff costs, which rose by A$1.1 billion. And while staff continued to be the most expensive area of operations, marketing and promotion increased their share of overall spending.

The sector’s total expenses increased by 6.8 per cent, surpassing the 5.8 per cent growth in earnings.

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