With fewer overseas students, Australia must fully fund research

In recent weeks and months there has been almost endless speculation in Australia about proposed policy changes that may cap the number of international students coming to study here.

As the bill to impose institution-level caps makes its way through parliament, the government has also moved to double the cost of international student visa applications to a non-refundable A$1,600, making Australia the most expensive for student visas among our global competitors – the US, Canada, New Zealand and the UK.

Politicians love to laud the global standing of our universities – with six in the global top 100, according to Times Higher Education’s World University Rankings 2024. This international competitiveness is largely built on Australia’s research success – and this success is what attracts highly talented international students to our best universities. In turn, it is the revenue from these students that allows Australian universities to sustain research productivity.

So the relationship between research excellence and attractiveness to international students is a symbiotic one. And this is why the research community is currently very nervous.

The direct causal relationship between international student revenue and research support was brutally exposed by the pandemic, as borders were closed and overseas enrolments plummeted. Are memories really that short? We are still recovering from that trough in revenue: deficits remain in most research-intensive universities, but the bigger impact has been the year-on-year savings targets and cost-saving measures needed to keep the books balanced. This is undermining risk-taking, creative endeavour and innovation.

It is also sapping the morale of researchers. For many of them, getting out of bed every day has become harder. And with the proposed visa restrictions making Australia the least likely destination for the world’s smartest students and researchers, they now go to bed worried about whether the resources will be in place to allow them to do their best work and, quite frankly, keep their jobs secure.

So what can be done? If limits really are to be imposed on universities’ ability to enrol international students, it is necessary to consider how to avoid unintended consequences on research and innovation. The most obvious solution is to adopt international best practice on research funding, in the form of evidence-based full economic costing (FEC).

Typically, research funding comprises two revenue streams. One is for the direct costs, such as researchers’ salaries and laboratory expenses. The other is for indirect costs, including state-of-the-art laboratories, infrastructure and specialist equipment, and the technical professional staff needed to run those facilities, as well as all the usual HR, finance and administrative costs. Together, these two funding streams represent the full costs of research, but how different countries support the indirect costs varies considerably.

In most analyses, these indirect costs are estimated to be about the same as the direct costs. So, for a four-to-five-year project whose direct costs are A$1 million, the full economic cost is A$2 million. In other countries, FEC is built into research-funding models, so the host institution receives the full A$2 million, or close to it: 80 per cent of FEC in the UK’s case, for instance. By comparison, in Australia, the institution receives approximately A$1.2 million: just 60 per cent of FEC. It is this funding gap in indirect costs that needs to be plugged by revenue from international students.

So let’s be smart in the development of higher education policy by joining the dots between international student revenue and Australia’s success in research and innovation. Any policy that proposes to regulate the numbers of students needs to be coupled to increasing revenue for indirect costs, so that the host institutions can pay for the research that is largely commissioned by government funding agencies. FEC, after all, is what the Universities Accord recommends the country move towards – and with good reason.

World-leading breakthroughs, such as the HPV vaccine developed in Queensland or the artificial heart developed in Melbourne, are just a tiny example of the downstream impact of discoveries made by Australia’s medical researchers. But a mechanism to replace lost international revenue will be vital if we are to continue to excel in research that drives innovation and our nation’s future economic prosperity.

John Carroll is the director of the Monash Biomedicine Discovery Institute and dean of biomedical sciences at Monash University, Melbourne.