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Research suggests that implementing a levy on international students may result in a reduction of the Australian workforce.

The implementation of a proposed levy on international higher and vocational education student fee income would lead to a decline in the sector and reduce the size of the Australian workforce, economic modelling (pdf) from Victoria University’s Centre of Policy Studies (CoPS) has showed.

CoPS researchers Xianglong Locky Liu, James Giesecke, and Jason Nassios said in the study that a five percent international student levy on higher education would raise the foreign currency price of export education by about two percent.

This increase would result in about a 6.6 percent reduction in international student demand, leading to activity decreases of 1.1 percent in tertiary education and 0.7 percent in technical and vocational education.

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"The effect of the levy on the education sector—which is to reduce student and staff numbers—is incongruent with a policy objective of assisting the education sector," the researchers said.

The study came in response to the Australian Universities Accord Interim Report, which included in its considerations a levy to be imposed on international students to fund national and sector priorities such as infrastructure and research.

"While these adverse impacts on the education sector could be offset to some degree by channelling the levy revenue back to the sector, this would raise additional complexities," according to the researchers.

"For example, it would introduce additional administrative costs by directing levy revenue from students through the tax system and then back to the education sector. It is unclear what value would be added by this process because the education sector already collects international student tuition fees directly from international students."

The researchers noted that many international students secure permanent positions in the Australian labour force, a reduction in international students would also mean a lower workforce supply, which would negatively impact the economy.

"First, many international students transition into permanent positions in the Australian workforce. By reducing international student numbers, the levy would potentially reduce this workforce flow, leading to a reduction in the size of the Australian workforce, and with it, the size of the Australian economy," the researchers said.

"Second, some international student income is used by the education sector to fund research. This means the levy risks reducing research funding. This might have longer-run consequences for Australia’s economic productivity growth."

Sector Opposes Proposed Levy

The Group of Eight (Go8), comprised of Australia’s leading research-intensive universities, already expressed its disagreement with the proposed levy due to its potential unfavourable effects on the sector.

"This redistributive tax would create countless unintended consequences, damage our higher education sector and international reputation. We must ensure that this process does not undermine our nation’s hard-won and enduring success in international education and damage Australia’s largest services-based export industry," Go8 CEO Vicki Thomson said.

The interim report identified five priorities, including the creation of more Regional University Centres (RUCs) to extend visible local access to tertiary education and the removal of the 50 percent pass rate requirement due to its poor equity impacts while calling for more reporting on student progress.

Other priorities identified were the extension of demand-driven funding to metropolitan Indigenous students, the extension of the Higher Education Continuity Guarantee into 2024 and 2025; and immediate engagement with state and territory governments and universities to improve governance.

"The government has committed to implement all of them and will consider the recommendations of the final report when it’s received," a Department of Education spokesperson said. "The Accord Panel will now review the submissions and report back to the government by the end of the year with a final report."

Submissions to the interim report ended on Sept. 1.

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