A new report from Universities Australia reveals that more than 40% of the country’s universities have operated at a deficit for most of the past five years. According to chief executive Luke Sheehy, the findings challenge the idea that the higher education sector is overflowing with funds.

He said the data paints a much different picture, noting that the fact that over four in 10 institutions are in the red should serve as a clear warning. Sheehy also argued that it is unrealistic to expect universities to enrol more students, increase research output, and boost productivity while funding per student continues to decline, adding that the financial pressures will eventually become unavoidable.

Universities Australia stated that international students account for roughly a quarter of university revenues, injecting more than AUD $51 billion into the national economy.

Sheehy said overseas enrolments have long helped sustain the sector as domestic funding has declined in real terms. However, the report cautioned that increasing policy uncertainty could disrupt this vital and dependable source of income for financially strained institutions.

“International education has helped keep the system afloat as domestic funding has fallen in real terms. That’s not ideology – that’s arithmetic,” said Sheehy. “Turning a national export success story into a political problem risks weakening one of Australia’s strongest economic assets.”

International students have attracted nationwide scrutiny as enrolments reached a record high last year, with 833,041 students recorded between January and October 2025, a 70% increase compared with the post-pandemic low in 2022.

Australia’s higher education sector has faced a wave of tighter immigration measures in recent years, as the Albanese government moves to curb overall arrivals.

In 2024, Australia limited new international student enrolments to 270,000 to better manage growth and pressures on resources such as student accommodation. The following year, the cap was lifted to 295,000, but universities were required to meet specific conditions, including strengthening engagement with Southeast Asia and demonstrating they could provide adequate housing, in order to secure places under the expanded quota.

According to Universities Australia, average government funding per Commonwealth-supported domestic student has declined by 6% in real terms since 2017, despite rising enrolment numbers.

The organisation also said that about 16,000 student places across around 14 universities receive no Commonwealth subsidy at all. In addition, funding for at least 17,000 places is reportedly being allocated to institutions that are not actually delivering the corresponding student load.

“Our universities are not just economic engines – they are places where people build their futures, where talent is nurtured and where opportunity is expanded for the next generation,” stated Universities Australia chair Carolyn Evans.

“We want our communities to benefit from the employment, facilities and opportunities that local universities bring. That’s why we need a healthy, financially sustainable university system – to support individuals to grow and succeed and for our nation to prosper.”

While Australia’s universities continue to grapple with widespread deficits and shrinking government funding, revenue from international students has become a crucial financial lifeline for the sector, helping to sustain teaching, research and campus infrastructure at a time when domestic support has lagged.

However, growing uncertainty around policy settings and enrolment caps has introduced new risks, underscoring that the future health of Australian higher education now hinges on both stable funding models and sensible international education policies that allow institutions to plan with confidence.