Challenges Facing Australian Universities: Enrolment Drop and Funding Cuts

The release of the 2025 Times Higher Education global rankings in October painted a bleak picture of the Australian university sector. Many of the country’s leading universities saw their scores plunge in metrics related to reputation, international collaboration and ability to attract international talent. In the Nature Index 2024 Research Leaders, released in June, it was a similar story: Australia dropped out of the top 10 countries for authorship in high-quality natural- and health-science journals for the first time since 2018.

Since emerging from the pandemic, Australian universities have faced growing pressures. Declining enrolments, planned caps on international student numbers, rising costs and administration fees and an abandoned research-evaluation platform have created an atmosphere of uncertainty. The drop in rankings is a warning: the sector seems to be in trouble.

“Since 2020, record numbers of universities have reported deficits,” says Andrew Norton, who studies higher-education policy at the Australian National University (ANU) in Canberra. In 2022, two-thirds of Australia’s 38 publicly funded universities were in deficit, and preliminary data suggest similar figures for 2023. A decade ago, it was one. Student numbers are also a concern. In 2021, total enrolments in Australian universities fell for the first time since 1954, although this was mostly an effect of pandemic-related travel restrictions on international students. The following year, enrolments fell again, but this time, it was different: domestic student numbers were in freefall.

Nature Index 2024 Australia

Against this backdrop, the Australian government performed a wide-ranging review of the sector, culminating in the release of the Australian Universities Accord in February¹. The report called for sweeping changes to meet the nation’s current and emerging social, economic and environmental challenges and provided a blueprint for change, with 47 major recommendations. Australian research, it stated, is highly regarded and globally connected, but the nation “doesn’t utilise the full potential of its university research as a source of innovation”.

Realizing that potential will be difficult. Shifting policy conditions, a declining demand for higher education domestically and rising salaries are putting extra strain on a system that is already close to breaking point. The mood, according to Norton, is gloomy. “Some universities will do better than others, finding alternative revenue sources and managing the resources they have more effectively,” he says. “But overall, I see no grounds for optimism at the sector level.”

Others see it differently. Merlin Crossley, deputy vice-chancellor of academic quality at the University of New South Wales in Sydney, the second-ranked Australian institution in the Nature Index, after the University of Queensland in Brisbane, says the recommendations in the Universities Accord provide great ideas to help turn things around. He points to the strength of the student body and junior academics, and says he believes the country has a deep commitment to knowledge. But, in the face of confusing new policies and changing investment priorities, will that be enough?

Tip of the cap

Front of mind for Australian universities is a federally mandated international student cap. Announced in May, the plan is designed to manage the growth of international students, whose numbers skyrocketed to a ten-year high in 2023, coinciding with rising rents and fewer available homes. It’s intended to distribute more international students to less prestigious institutions and those in rural areas, which aligns with recommendations from the Universities Accord to find ways to support them better.

The cap would kick in at the beginning of 2025, pending parliamentary approval by 1 January. Although the bill was originally supported by the opposition Coalition government, a surprise announcement in early November revealed the Coalition party intends to vote against the bill. Universities and other educational institutes have spent months planning for the caps, assuming they would be implemented.

The caps would limit new international student enrolments in higher education and vocational education courses across Australia to an estimated 270,000 for the year, down 53,000, compared with 2023. Caps for institutions are calculated based on existing international student numbers; universities with low percentages of international students would be allocated higher international student caps than universities with higher percentages, many of which would face cuts. Australia’s highest ranked, most research-intensive universities — including the Group of Eight institutions that are responsible for more than 70% of the country’s research output — would face cuts in international student numbers. Monash University in Melbourne, for example, which is ranked third in the Nature Index in Australia, would have its international enrolments capped at 10,000 in 2025. The university exceeded 10,000 new international enrolments in 2024, and it had forecast a further increase in 2025.

Many researchers have criticized the plan, raising doubts that it would work as intended. In a commentary for The Conversation in August, Norton says the caps could lead to a situation in which some universities are forced to reject international students who they would have otherwise enrolled while others fail to fill their quotas. Norton says it’s likely that many prospective students will abandon plans to come to Australia if they can’t get into their chosen institutions and adds that the plan is unlikely to improve housing availability as intended. A report by the Student Accommodation Council, an industry group, found that international students in Australia make up just 4% of the total rental market. Alec Webb, chief executive of the Regional Universities Network, which represents seven universities primarily from regional Australia, told the Sydney Morning Herald in September that although the student caps seem to allow growth for some regional universities, they are still well below pre-pandemic levels.

International students are crucial to the Australian higher-education sector. In 2022, their tuition fees amounted to Aus$8.6 billion (US$5.68 billion), which represents more than one-quarter of all university revenue. A fall in revenue from international students would be felt keenly by Australian researchers, with nearly 60% of Australia’s basic research expenditure coming via its universities as of 2020, compared with the United States, at 47%, and the United Kingdom, at 43%.

“The idea of continually increasing international enrolments to cover the growing costs of research infrastructure was never sustainable, so I welcome some attention to this,” says Crossley. “That said, I wasn’t expecting cuts to international student numbers. If the cuts are as rapid as planned, that will have a detrimental effect on Australia’s research capacity, sovereign capability, prosperity and even, perhaps, our culture of curiosity — if we cannot find a way of bolstering the sector.”

Mike Ryan, interim deputy vice-chancellor of research and senior vice-president at Monash, says the university understands the importance of managing immigration, but that international student caps are “the wrong approach”. He notes that the caps would impact university budgets in 2025, which would require “difficult decisions” on how to prioritize spending.

Investing in the future

The international student cap highlights broader challenges facing Australian universities, including an uneven spread of resources among institutions that are competing for dwindling funds. “In Australia, spending on research and development is already at its lowest ever share of gross domestic product (GDP),” says Ryan. In 2021–22, Australia spent Aus$38 billion, or 1.68% of GDP, on research, down from approximately 2.25% of GDP in 2008–09. This is well below the average of 2.7% of GDP for Organisation for Economic Co-operation and Development (OECD) nations. The United States, by comparison, spent 3.5% of its GDP in 2021–22, and Japan spent 3%.

Researchers in basic science are concerned that the government’s increasing focus on translational research — which has long been a weakness for Australia — will further undermine the future of their work. In 2023, the Australian government committed Aus$2.2 billion to bulk up translational research, creating programmes that foster connection between sectors. Questions remain over where the talent will come from to carry out this research, particularly in light of the international student caps. A survey of 660 early to mid-career academics in health and medicine across Australia, published by Monash University and the University of Melbourne earlier this year, found there were high rates of burnout, bullying and harassment among the group, and a growing unease about career stability. Fewer than 17% of respondents said they would recommend that a new graduate take an academic path.

Kelly Kirkland, a psychologist at the University of Queensland, who helped prepare the survey, says there were deep frustrations in the early and mid-career researcher communities, which could have lasting effects. “As job prospects narrow, many are looking abroad or considering leaving academia altogether, which could result in a ‘brain drain’ that would really impact the quality of Australian research in the long run,” she says.

The need for greater funding security for early and mid-career researchers was highlighted by the Universities Accord, which recommended increasing competitive government grants that run for five years or more. It also urged the government to make research training more attractive by increasing stipends and providing tax breaks to part-time trainees. In May, the Australian government announced a Aus$430 million grants initiative for early and mid-career researchers in health and medical fields.

A changing research landscape

Funding challenges and student caps aside, the Australian research system is in a state of flux. A replacement for the national research evaluation and assessment frameworks that were scrapped in late 2022 by the government has yet to materialize. The Excellence in Research Australia (ERA) framework, developed and administered by the Australian Research Council (ARC) for a decade, scored universities on their research performance and research impact against global benchmarks. The scheme was unpopular among many university staff and researchers because of the burden it placed on resources and administration, and the way it pitted researchers, institutions and research fields against each other. An ERA Transition Working Group is drawing up the new framework, but there is no timeline for when it will be announced.

It’s a rare opportunity for a country to completely rewrite its research evaluation system (see Nature 617, 437; 2023) and it comes at a time when many countries are considering what kind of research they want to value and reward. Depending on how Australia writes and rolls out its new system, it has the potential to position itself as a global leader in the space — something that the Universities Accord highlights as a priority, noting the absence of a “coordinated, future-focused and evidence-based, decision-making capacity” in the sector over the past 20 years.

Ryan says there is an increasing focus on responsible research practices among Australian institutions, which should be reflected in research assessment practices. Institutions are taking measures to improve diversity and inclusion, and are engaging more frequently with local and minority communities to ensure that they have a say in research that affects them. The Universities Accord urges the sector to bolster First Nations’ involvement in the system, for example, by ensuring that Aboriginal and Torres Strait Islander people are in leadership positions to influence policy-writing, funding and programmes.

According to Emma Lee, a trawlwulwuy woman of tebrakunna country, in northeast Tasmania, and a sociologist at Federation University in Victoria, “There are some amazing federal government policies and strategies that are genuinely elevating Indigenous commercial and conservation acumen as central to Australia’s economic future.” Lee highlights the Sustainable Ocean Plan, a government initiative to manage and protect Australia’s marine environment, as an example of strong collaborative work. She notes how the Australian Department of Climate Change, Energy, the Environment and Water has centred Aboriginal and Torres Strait Islander people in the project and says their consultation work highlights the importance of informing food security and conservation policies with Indigenous ecological knowledge. She also points to the importance of collaborating with Aboriginal and Torres Strait Islander people to achieve Australia’s legislated target of net zero greenhouse-gas emissions by 2050, and says some good work is being done in the fisheries and farming sectors.

There is a concern, Lee adds, that research by Aboriginal and Torres Strait Islanders is “so overwhelmingly underfunded” compared with the impact that Indigenous knowledge is expected to provide across all streams of Australia’s national science and research priorities. The turmoil that the research sector is experiencing right now could an opportunity for Australia to elevate Indigenous knowledge more fairly, she says. Upheaval can open “new ways of undertaking collaborative research and injecting innovation” across higher education, says Lee. “If not now, then when?’

Crossley is also hopeful that the sector can build strength and says the suggested changes to research funding in the Universities Accord is a great place to start. Those suggestions — which include bulking up investment in basic research, attracting more students by removing barriers to research training and implementing fairer stipends — could help plot a path towards a more sustainable future for Australian research.