Knowledge Nation No More?

By Matt Ryan, in our Sydney office

You get to hear a lot about Australia’s resources endowment. Iron ore ($57bn), coal ($39bn) and gold ($15bn) are the nation’s leading exports, being shipped to the four (less fortunate) corners of the earth. But few will guess the fourth on the list: oil maybe, or gas, or how about wheat? Tourism? Getting warmer. It’s actually education.

Education exports, which consist of the GDP contribution from international students mostly studying in Australia, including fees and other living expenses, grew from $10bn in 2006 to $16.4 in 2010, but has since fallen to $14bn.

Stricter entrance requirements and the higher Australian dollar have stung. Australian governments have been a bit complacent about the sector’s growth, and are now scrambling to see how we can recover lost ground.

Unfortunately it might not be easy to stop the rot. Students broadly come here to study looking for three things:

1.       Knowledge and skills

2.       Accreditation and career access

3.       Lifestyle and/or residency

The last item remains a major draw card, but competition in the first two areas is heating up. As well as being a relatively expensive place to do business, Australian education institutions are under threat from themes of scale and globalisation.

Like other industries, education benefits from economies of scale. Materials can be provided much more efficiently to a larger audience, and with the help of the internet lectures can now be delivered simultaneously throughout the world. Face-to-face tuition and class interaction, which historically could only be done local providers, is becoming increasingly easy to deliver globally too.

Accreditation and career access, which historically have been monopolies of local institutions like universities, provides more protection from global competition, but this is likely to crumble over time. Over the past few decades the value of university degrees has eroded compared to professional accreditation, and professional organisations themselves are becoming increasingly global. Indeed professional accreditation, currently mostly only available at a post-graduate level, may well move downstream to displace graduate degrees at some point.

It’s not just our education exports that are under threat, education importers will compete for Australian students too. How long until, like call centres, the education provided to our students goes offshore?