The Age

ADVENTURERS from China in the 1850s thought of Australia as Hsin Chin Shan - the New Gold Mountain where golden nuggets were said to lie scattered across the land. These days China has become the new gold mountain for Australian universities, given their increasing reliance on the fees paid by young Chinese and other Asian students.

But just as the Australian gold began to run out in the 19th century so, too, has the flow of fee money from overseas students who are turning in their tens of thousands to other countries.

Although these students are still expected to contribute $13.5 billion to the Australian economy this year, with nearly half that sum pouring into university coffers, the total is way below the massive $18 billion their predecessors spent a mere three years ago.

The number of international students in Australia fell by nearly 80,000 - or more than 20 per cent - in the three years to June 30, down from a peak of 386,300 in June 2009. The number of Chinese students in Australia has dropped to 71,230, an 11 per cent fall in the past two years.

University heads are likely to be even more perturbed by what lies ahead. A 9 per cent slump in new overseas students enrolling in higher education for the first time means total enrolments will soon start falling even more sharply, as will the income from fees. Adding to those concerns is the fact offshore visas granted to students in China slid 9.5 per cent in the 12 months to June 30 - on top of a startling 20 per cent collapse the previous year.

But this fall is not showing up in actual higher education enrolments because of a ''churn'' effect. In the year to the end of June, 33,500 students whose visas were due to expire - notably those from China and other parts of Asia - reapplied to undertake a different course or moved from vocational education colleges to university, avoiding the need to return home.

This churn effect tends to disguise the heavy downturn in the number of new students seeking to enrol in universities.

Overall, 139,000 former student visa holders stayed on in Australia after obtaining a visa in a different category such as working graduates, skilled temporary migrants, tourists and even, as 6741 did, becoming a partner to someone holding permanent residency.

Jude Perera, who is among the more than 5500 Sri Lankans studying in Australia, is an example of this trend to stay on. Mr Perera started a two-year advanced diploma in electronics and communications engineering at RMIT in 2009, completing the course last December. He then renewed his student visa so he could undertake a bachelor of engineering in the same fields at the university and gained a two-year credit off the four-year degree because of the diploma studies.

''I will try to get a job here when I graduate but if not I will go back to Sri Lanka,'' Mr Perera says. ''I have an offer to work there because I did six months' work experience with the employer before coming to Australia. I will have to do three months more work experience here to get my degree, but I would like to stay after being here for four years and having made many friends.''

Despite the clear downturn in international numbers, Belinda Robinson, the new chief executive of Universities Australia, has an optimistic view of the situation facing universities. Ms Robinson says although universities have suffered a fall, the vocational education and English-language colleges are enduring worse declines.

''Compared with those sectors, higher education has done much better but, yes, there has been a drop and one reason is the rising value of the Australian dollar, while another has been visa processing,'' she says. ''But the government has responded very effectively in streamlining processing for students wishing to study in Australian universities.

''We are still to see the full effect of this on enrolments, or on the changes to work rights for international students. Here the government has changed the rules to allow them to work for up to 40 hours a fortnight and that, plus extending to two years the time that graduates can stay working in Australia, does give universities a competitive edge over those in other countries.''

Ms Robinson says the enrolment decline does not include the students Australian universities are enrolling in their offshore campuses, noting that Monash is the first to do so in China, and that these moves could prove very successful. ''We have some good success stories with offshore campuses and it is something that universities are taking seriously and adopting quite assertive campaigns,'' she says.

This issue is taken up in a new report on the increasing global competition for fee-paying foreign students. Prepared by Sean Gallagher and Geoffrey Garrett from the University of Sydney's US Studies Centre, the report warns that more and higher quality universities from around the world are aggressively entering the recruitment game - led by some of the biggest and best American public universities.

''By enrolling international undergraduates in their thousands, budget holes are being plugged and research programs cross-subsidised like never before,'' the report says. ''In the last few years, the attraction of the United States as a destination for international students has increased markedly … [including] a staggering 43 per cent increase in Chinese undergraduates.''

Dr Gallagher and Professor Garrett argue that Australia's top universities should now be planning long-term strategies of ''hard-wiring'' themselves into China to reduce their reliance on the export model of selling education to foreign students - not least because China aims to double the number of foreign students enrolled in its universities by 2020 to more than 500,000 - in direct competition with Australia, Britain, Canada and the US.

Australian universities could pursue ''proactive multinational university-like initiatives'' as stepping stones towards their entry into China and at a pace that manages risk levels, they say. This would include targeting mid-tier Chinese cities ''with growth momentum and established universities'' to seed education and research initiatives that would benefit China. That way Australians would go seeking gold in China, reversing what happened in the 1850s.