Factoid watch

1. The Australian confirms my suspicion that the size of education as an export industry is inflated by including money earnt and spent in Australia by overseas students.

2. The bureaucrat formerly responsible for reporting Australia’s education statistics to the OECD confirms that Labor incorrectly claims that public spending on tertiary education fell under the Howard government.

14 thoughts on “Factoid watch

  1. Do you think it is reasonable to factor in the spending by overseas students in Australia at all as far as policy is concerned? What would be the right amount?


  2. Rob – This is another conceptual problem in the way this information is presented. Most of education exports are actually the goods and services assumed to have been consumed here. Yet this is compared to individualised mining and agricultural commodities. A lot depends on how you classify and then aggregate particular exports. Should we compare education with all of agriculture, or agriculture divided between animals and crops, or to particular commodities: beef, wheat, etc. Undoubtedly education is generating significant exports for Australia, but to me saying it is the third largest export industry or whatever is dubious; a political point rather than one that has a solid intellectual basis.


  3. I’m not sure why you don’t like (1). While there are likely to be measurement problems, spending by non-Australians within Australia should count as an export. (Why anyone would want to count exports is another issue too).


  4. “spending by non-Australians within Australia should count as an export”

    Only if they are non-residents, such as tourists. Foreign students are residents.


  5. I’m not sure of the ABS definition, but I imagine most people think of exports as generating foreign currency. If overseas students are spending money they earned while here, there is no foreign currency involved.


  6. Andrew, that is quite right. But my definition (which I think is the official definition) applies more generally, to cases where a student/tourist from country A spends money in country B and those countries share a currency, such as the Euro.


  7. Johno and Sinc are on the money.
    Regarding the basis for the definitions, and to simplify a bit (though not ‘unduly’), whether foreign student scome here to study depends on the competitiveness of our education offering. Whether, once they’re here, they buy Australian goods or foreign goods depends on the competitiveness of the Australian inudstries that buy those goods; not on anything to do with the education sector. On this basis, it is misleading to attribute such exports to education as if they are some spillover benefit of education. Were foreign students not to come here, our BOP would tend to deficit putting downward pressure on the exchange rate, and in other ways releasing resources that are spent servicing students. Those released resources would generate their own exports. Net effect on exports? Hard to say precisely, but zero is arguably a fair working proposition.


  8. It’s less than obvious that O’Neill’s interpretation of the stats (in which the discount for up-front payment of HECS is treated as part of government spending on education) is the right one. Investment in human capital misses out on a lot of benefits available to investment in physical capital (depreciation for example), so it seems reasonable to treat the concessional aspects of HECS as a tax offset, and to regard the standard (after-graduation) payment of HECS as fully private. On this basis, the up-front discount is a commercial allowance for prepayment.


  9. John – I’d take the view that the general tuition subsidy, apart perhaps from law and commerce where the subsidy is low, more than compensates for the lack of tax benefits. The discount to the student is paid direct to universities (ie, unis get the same amount regardless of which payment option the student chooses), so that looks like a straight public subsidy. Alternatively, the government takes longer-term losses in implicit interest subsidies and bad debt. I don’t think we can call this ‘commercial’ in any normal sense of the word, since either way taxpayers face high costs.


  10. Hi Andrew. Just as an aside, I’d strongly suggest you avoid citing The Australian as confirmation of anything. While it may have once been a credible newspaper, today its reputation is not all that far removed from the lamentable Fox News.


  11. Pete – They push some of their campaigns too far, but the general news reporting is as reliable as the other papers. In this case, I have to confess to an involvement in the story. The journalist rang me with his question about the data, and based on my previous work on the methodology I said I believed it did not discount local earnings, but that he should double check with the ABS. He did so, so I am happy to regard this as confirmed.


  12. Andrew – I doubt the US will see any overall crisis of demand, which is the threat that a downturn in overseas students poses to Australian education. However, as the Chronicle article suggests I think a shake-up among the suppliers of education is plausible. The high-cost institutions have been hit badly by the lower value of and returns from their endowments, but their capacity to pass costs onto students is limited by financial strain in their client families.

    On the other hand, there is a lot of literature about poor cost control in the top institutions, so there is scope for saving money as well.


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