Income levels are important in determining education export opportunities

02 Dec 2016


  • Tim Quinn
  • International Trade

In 2015-16 the value of exports of education travel-related services grew 9.4 per cent in 2015-16 to $19.9 billion.[i]. Education-related travel exports currently represent approximately 29 per cent of Australian services exports and 6.4 per cent of total exports.

Education-related travel exports comprise exports of higher education, vocational education and training (VET), English Language Intensive Courses for Overseas Students (ELICOS), schools and the non-award sector.[ii] Growth in overall education-related travel exports in 2015-16 exceeded the ten year trend growth rate of 7.7 per cent with higher education leading the charge, up $1.2 billion to $13.7 billion. The schools sector led growth in percentage terms, up 14.8 per cent. Exports of ELICOS and Non-Award both experienced below-trend growth up 1.2 per cent and 0.8 per cent, respectively.

Education-related services comprise both fees ($9.2 billion) and goods and services ($10.6 billion). In 2015-16:

  • Exports from fees were up 7.8 per cent, 0.9 per cent below trend. Schools fees exports grew 15.8 per cent for the year. Higher education fees exports ($6.5 billion) were one per cent below trend but still grew at a respectable 8.6 per cent.
  • Goods and services-related exports increased 11.0 per cent and 4.3 per cent above trend. Good and services consumed by school students increased 15.8 per cent (to $0.4 billion). Consumption of goods and services by higher education students increased $707 million (or 4.2 per cent above trend) rising to $7.2 billion.


Australia’s competiveness is discussed, analysed, and reported with the bilateral exchange rate often the primary focus. The bilateral rate is an important part of the exports story (as noted in this 'dollar and competiveness' note). The level of the Australian dollar influences crucial decision factors such as whether to study in Australia, choose a competitor’s services, or perhaps studying at home while using use Australian educational services. Quality, access, and proximity are also important, so too are income and wealth – decisions to consume are often based on income and once that decision is made then price will usually be brought into the decision mix.

In its report, The shape of things to come: higher education global trends and emerging opportunities to 2020, the British Council noted that wealth in per capita GDP terms is also a key driver of future tertiary education demand. The British Council found that the relationship between income and enrolment was not linear. Instead, small increases in incomes at levels below US$10,000 (2009 dollars) result in strong increases in gross tertiary enrolment ratios with the effect then tapering off as per capita income rose above US$10,000. The British Council relied on five components to explain this phenomenon: [i]

‘….household incomes, growing middle classes, demand from parents to provide their children with a tertiary education, and a higher gradient of skills demand from structurally changing economies. It may also reflect an increased fiscal capacity of governments to fund and expand access to tertiary education.

Austrade Economics adopted this hypothesis and sought to replicate aspects of the British Council’s work.  Our analysis is based on data for overseas student higher education enrolments at Australian institutions and home country income data for 176 countries (grouped based on whether they were ‘developing’ or ‘developed’ economies).[ii]

Using these two groups a foundation ratio useful for our analysis was found – for every enrolment from a developed economy in 2015, 2.5 enrolments were from a developing economy. We also found the same kind of non-linear relationship between enrolments and home country income indicating strong enrolment levels for low income countries with that relationship tapering off. These findings allow us to adopt the British Council’s explanation and apply that to the Australian market.[iii]

With over 70 per cent of markets still located in the ‘developing’ economy grouping, Australia’s overall onshore opportunities remain positive for the medium to longer term. Many markets considered in our analysis are likely to experience steady growth in wealth (such as moving from low income to lower middle income and lower-middle income to middle income) and therefore, their propensity to consume tertiary education outside their home country will likely increase.[iv] This will result in the potential for increased education exports leading to growth in employment, investment, and wealth.

[i]   Education-related services exports provided to aid and defence are valued at approximately $200 million.
[ii]   A non-award course is where the student attends lectures and tutorials but is not awarded a degree at the end of the process.
[1]  Education-related services exports provided to aid and defence are valued at approximately $200 million.
[2]  A non-award course is where the student attends lectures and tutorials but is not awarded a degree at the end of the process.
[3]  The British Council’s modelling relied on data to 2009 due to complete tertiary education data only available up to 2009.
[4]  These groupings have been based on World Bank Country and Lending Groups. For the 2016-17 year, lowincome economies are defined as those with a GNI per capita, calculated using the World Bank Atlas method, of $1,025 or less in 2015; lower middle-income economies are those with a GNI per capita between $1,026 and $4,035; upper middle-income economies are those with a GNI per capita between $4,036 and $12,475; high-income economies are those with a GNI per capita of $12,476 or more.
[5]  Austrade found the statistically significant relationship as: log(Australian tertiary enrolments) = ‑3.42 + 0.86*log(income) for developing economies while the British Council’s research found the relationship as: gross tertiary enrolment ratios = – 1.1472 + 0.17*Iog(income).
[6]   This assumption relies on business-as-usual activity and does not include consideration of adverse economic, political, health or social impacts on the growth of income and wealth.