By Sean Gallagher
The worst global recession in 75 years is delivering a cruel blow to Australian universities. For years America's leading public universities have quietly watched Australia's success in educating thousands of full-fee paying Asian students, especially from China. Now forced to find new sources of income, these great institutions are rapidly moving to adopt the Australian university business model.
Australian universities are facing the challenge of competing for Asia's best students against global brands such as Berkeley and UCLA. After two decades of practically unrivalled access, Australian universities need to review their comparative advantage against this new and formidable competition.
Is the threat real? To answer, it is worth looking at the strategic motivations of American public universities as well as the Asian attraction to studying in America.
There are three main incentives for US public universities to attract the best Asian undergraduate students.
First is the need to diversify revenue sources. Most of the public universities can no longer rely on their state legislatures to underwrite their operations and must seek new revenue sources without threatening the quality of education. As an incentive, many states are adopting the Australian model by allowing their universities to retain the income generated from foreign students. Tough US entry standards will ensure only the best Asian students gain a place, not just those with big bank balances.
Second, the number of US high school leavers is also plateauing and the quality declining, so universities are looking to Asia.
Finally, Asia will be the world's economic powerhouse this century and US universities want Asia's leaders as their alumni. Cultural diversity of the undergraduate student body is also central to contemporary pedagogy. Education must reflect their students' 21st century reality for it to be relevant.
Asian students are likely to be attracted by what US colleges offer. Despite tough entry hurdles, the reward is high. From outstanding education to safe residential communities to first class facilities to an extraordinary network of influential alumni and to holding a degree from a university with a global brand, the total package is impressive. And Asian students are influenced in their education choices by the US-dominated world university league tables.
Even the price of American education compared to Australia is becoming more competitive as the long-term value of the greenback continues to decline versus a stronger Aussie dollar. If the University of California moves from four-year to three-year undergraduate degrees, other US universities would almost certainly follow suit, creating an even playing field.
The size of the threat to Australian universities is considerable, particularly from the US west coast, which faces Asia. The University of California's Commission on the Future proposes to quadruple the number of "non-resident" students from interstate and overseas. By 2020 this would mean thousands more places for Asian students based on projections. Berkeley and UCLA are already planning to significantly boost Asian student numbers. The universities of Washington and Oregon are looking to Asia with the same intent.
From the Asian students' perspective, the comparative advantage of a university education in Australia is waning. The four main pillars - a quality education, a secure and safe environment, affordability, and pathways to Australian residency - have started to crumble.
In the fierce global contest for quality students, Australian universities will find it more difficult to compete, particularly against the package on offer from leading US institutions. Strong incentives for America's leading public universities to recruit Asian students are yet to be developed into a strategy to attract Asia's best. There is still time for Australian universities to plan their counter-attack.
Australian universities could do well to follow a proven US strategy. To revive its tarnished image, the University of Southern California offers high profile lucrative scholarships to the best American students, in direct competition with Harvard, Princeton and Yale. The USC strategy of building a reputation to drive quality - rather than the standard Australian approach of quality driving reputation - has been highly successful.
Regaining the confidence of the Asian market in the four pillars of Australia's education package is a critical first step. Beyond that, constructive measures should consider a move towards a US-style residential model for Asian students, the student services that go with it, and better financial aid. Headlined by prestigious scholarships, this package would boost Australian universities' reputation and with it the likelihood of attracting the best Asian students.
In the end, the highest quality Asian students will be attracted to an education that prepares them best for this Asian century. With significant expertise and experience in educating Asian students, Australian universities have a good head start on their formidable and well-resourced American competitors.
Dr Sean Gallagher is a research associate in American higher education and chief operating officer at the US Studies Centre at the University of Sydney.