The Australian Government should invest more and step up its involvement in recruiting overseas students, according to IDP Education Australia, one of the country's main student recruiting agencies.
The number of students applying to Australian universities was down 10 per cent in the first half of the year compared with 2003, while numbers of applications for all education sectors dropped by 8 per cent. This has yet to translate into a fall in enrolment figures, but that will occur if numbers continue to decline.
After a crisis meeting to discuss the problem, IDP raised concern about the potential impact on the English language and foundation-course sectors, as well as on higher education undergraduate enrolment. (IDP recruits about one in four overseas students for Australian institutions.) Numbers of foreign student enrolments in vocational education institutes and English language colleges increased by 4 per cent in 2003, compared with a 10 per cent rise the previous year.
In Melbourne, RMIT University put part of the blame for its A$20 million (£7.9 million) revenue shortfall this year on the decline in overseas demand.
Vice-chancellor Ruth Dunkin told staff that budgets would have to be cut.
Dr Dunkin said the shifts in student demand were caused by a number of factors, including increased international competition, as well as changes in Australian visa regulations and the higher value of its dollar.
IDP recorded a turnover of nearly A$77 million last year after processing 23,000 successful applications from overseas students. But this year's fall in numbers has resulted in an A$8.6 million drop in application processing fees.
The cut in revenue means a forecast A$2.5 million profit in 2004 is likely to become a A$1.6 million loss. With more than 700 employees in offices in 36 countries, IDP has indicated it may be forced to close some outposts.
In New Zealand, English language colleges are feeling the effect after being hit badly by a decline in foreign enrolment of almost 30 per cent over 12 months. Universities and polytechnic colleges will almost certainly suffer from the downturn.
The Association of Private Providers of English Language said the education export industry was in "a very profound and disturbing crisis" and there were no signs of recovery.
Language schools were the only part of the international education sector that took enrolments continuously all year round, the association said.
That meant they were the "canaries in the cage" in terms of market trends.
Figures released by the Department of Statistics show that only three of 20 countries with students in New Zealand showed a growth in enrolment in the year to March.
Australian Education International, a group within the federal Education Department that monitors overseas numbers, noted that an "easing" in the growth rate started last year.
Australia and New Zealand have been affected by increased competition from other recruiting countries, most notably in the South-East Asian market, where enrolment declined significantly among students from Singapore and Malaysia. There was also a sharp fall in enrolment numbers from China for English language courses.