Monday, August 6, 2012

Visa hit to education sector

The ABC Inside Business program at the weekend interviewed the CEO of education service provider Navitas with comments on the impact of the currency and visa regulations for foreign students:

Well Rod Jones, how much of the decline in Navitas's profit is due to the dollar and how much due to the changes to the visa requirements for education?

ROD JONES, CEO, NAVITAS: I think a large part of it’s driven principally by the changes in the regulatory environment which means that the opportunities for students to come and study in a number of our key markets have been reduced substantially.

ALAN KOHLER: Do you think it’s fair to say that with the way that the dollar’s been so strong, that actually everything else has to go really well for things to go properly for the education sector, which means that the impact of the changes to visa requirements was so much greater because the dollar was high?

ROD JONES: I think probably two years ago my answer to that would have been no. I think as we've gone along and the Australian dollar’s held up to the levels it has, it’s probably had more of an impact.

ALAN KOHLER: The combination of the two things that have occurred in Australia, the dollar up and the regulatory changes, what's that left the future of education?

ROD JONES: I think it’s highly positive. The demand for education by students has not changed. The demand out of the major source markets for students is still there.

ALAN KOHLER: But aren't more of them going to the US and Canada in particular?

ROD JONES: Yes. Certainly in terms of Canada there's been a switch towards that because of the regulatory issues in the UK and Australia, but if you look at all the reports moving forward and the opportunities that exist for students, Canada is not going to be able to meet the demand, nor is the US.

The four key demand countries will continue to be Australia, UK, US and Canada. The opportunities in Australia are improving because the regulatory environment has significantly improved, so we expect to see significant growth in Australia moving forward.

ALAN KOHLER: The foreign student market for Australia was about $18 or $19 billion. What's it down to now?

ROD JONES: Probably in the range of $12 to $13 billion. Certainly in 2011, which were the last figures, it was about $15.5, so it’d come back to - significantly from the $18-plus mark and we suspect it’s probably come back about the same levels into 2012.

ALAN KOHLER: So where do you think it’ll settle with the currencies where it is, but with the improvement back to where visas you think ought to be?

ROD JONES: We're now seeing a turnaround. There's no doubt that the market has bottomed in terms of student numbers and we are clearly seeing, as I think most parts of the industry, a return of students back to Australia, so we suspect it’ll start growing from here.
Education is a significant export industry for Australia and also for Cairns. So it has surprised that  policy changes to visa regulations didn't receive more prominent media and political attention with respect to the weak Far North economy.

The regulation changes were a response to perceived abuses to obtain residency. This has previously been covered at Loose Change and also by Alan Kohler at Business Spectator, and Stephen King from Monash at Core Economics. There have been subsequent reforms last year to boost the university education sector.

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