An unexpected fall in the number of students from China seeking visas to study in Australia has alarmed vice-chancellors.
Chinese students contribute more than A$200 million (£75 million) a year in tuition fees to university budgets. Some 17,000 mainland Chinese enrolled last year at Australian universities and thousands more were studying at technical colleges, private institutions and schools.
Many universities have become heavily reliant on fee income from foreign students.
Increasing competition from Britain and Europe, a strong Australian dollar and changes in Chinese attitudes are believed to have caused the decline.
This is the first time Australia has experienced such a drop in enrolments since the early 1980s when the then Labor government ordered a crackdown after claims that hundreds of Chinese were arriving with student visas, then disappearing into the system.
Earlier this year, Amanda Vanstone, Immigration Minister, announced amendments to immigration law making it more difficult for immigrants to obtain permanent residency.
The number of visas issued to Hong Kong students fell by almost 1,000 or 14 per cent last year compared with 2002, while those issued to Taiwanese students were down by nearly 20 per cent and those to students from Singapore by 10 per cent.
David Shi, head of China operations for the university-owned recruiting company IDP Education Australia, said he had warned universities last year to expect a correction.
"I believe Australian education has become conceited and over-confident about China," Mr Shi said. "People think the China market will expand indefinitely with more demand for places than the supply can meet.
"Even last year, university managers were asking how they were going to cope with all the Chinese students flooding in. So I told them: 'You don't have to worry because the students won't be coming.'"
Mr Shi said Australia was facing increasingly stiff competition from other countries - especially Britain and other major European nations.
Britain's change in visa regulations permitting Chinese students to remain in the country and work for two years after graduating was having an immediate effect.
"Apart from more competition and the stronger Australian dollar, the most important reason is that the market in China has become much more mature," Mr Shi said.
"Chinese students used to go overseas, get a degree, come back and earn lots of money. Now they return and find their friends who attended a local university are earning more than they can."