How the Cost of Living Crisis Is Uniquely Affecting International Students

Australia is experiencing a cost of living crisis not seen for over 30 years. With inflation having risen 5.4% in the year preceding September 2023 and the IMF estimating such conditions won’t subside until 2025, many Australians are budgeting and saving to withstand this challenging economic climate. However, economic headwinds don’t impact everyone equally.

Many international students face financial difficulties when studying abroad, beyond budgeting for their tuition fees. Increasingly, accommodation, transportation and general day-to-day living costs are a major concern. The scarcity of affordable and centrally located housing, coupled with below-average income earning opportunities means this demographic is particularly vulnerable to rising costs due to inflation. It’s important to look at how international students are burdened by inflation, and the steps which could be taken to alleviate their financial struggles. 

The underlying causes of rising inflation vary and typically boil down to excessive widespread spending post-pandemic, high oil prices, as well as disruptions to overseas supply chains caused by extended lockdowns in China and the continuing war in Ukraine. This has led to increased prices of consumer products across the board, from plain flour to plane tickets, and now international students studying in Australia are feeling the effects directly.  

The prices of everyday consumable items, including food and non-alcoholic beverages, grew by 8% over the past year, whilst clothing and footwear prices grew by 3.2%. Inflation in the education sector is shown to have disproportionately grown compared to that of the national rate. Between March 2022 and March 2023, it is estimated that the cost of tertiary education jumped nearly 10%, one of the largest of any sector. 

Furthermore, the Federal Government announced that from October 1, 2023, international students wanting to study in Australia will be required to show evidence of $24,505 in savings, a 17% increase from the previously required amount. The Government said in a press release that such measures were enacted to ensure students coming to Australia could support themselves, while avoiding a job search scramble and potential exploitation. 

However, even if international students were allowed to enter the country, and subsequently secured part-time work, the Federal Government’s recent scrapping of unlimited work hours, which had been in place since early 2022, means they are limited to 48 hours of work per fortnight. Indeed, the removal of unlimited work hours was widely applauded by education providers, as the policy was considered overly generous and distracting students from their core purpose of studying. But the combination of limited income, rising tuition fees, lack of affordable housing and growing everyday living costs means international students face continual financial challenges. According to the ISANA Communications Manager, Bronwyn Gilson, international students can also be subject to discrimination which puts them at a distinct disadvantage in the job market. 

“International students tend to take any work due to unbiased, and biased discrimination. That is because their ethnicity or visa status equates, in some minds, to no long-term commitment, and getting to first interview stage can be a real challenge.”  

According to Ms Gilson, these disadvantages in the job market, coupled with less access to family support which is often more readily available to their domestic counterparts, means this demographic is uniquely impacted by the current economic crisis. 

Furthermore, given that many international students come from developing countries, the poor exchange rates of their native currency means their funds are already eroded when they arrive in their destination country. To understand potential solutions to this issue, we must first look at the two most critical issues international students face in today’s economic climate; finding part-time work and securing affordable accommodation. 

However, before we unpack the challenging economic climate facing international students in Australia, it’s important to note that the current cost of living crisis is not a local issue, but a global one. According to IDP’s Emerging Futures 4 survey, which surveyed more than 10,000 prospective and current students between July and August 2023, prospective students believed USA and UK had a higher cost of living than Australia. The latest statistics from Trading Economics show that Australia actually has a higher inflation rate than both Canada and USA, but it is still lower than that of the UK, Ireland, and New Zealand. Whilst Australia’s cost of living crisis can’t be ignored, it’s important to remember that this market is facing similar economic headwinds alongside other top destinations, and from a student perspective, key competitor markets are faring less positively.  

Securing accommodation is arguably one of the most important aspects of a prospective international student’s journey. However, it is becoming increasingly difficult due to growing rental costs. According to the Australian Bureau of Statistics September 2023 quarterly report, national rental prices since the previous year have risen almost 8%, the largest increase since 2009. The tight market is the result of nearly ten consecutive quarters of rental increases for both houses and units. Vacancy rates are also at dispiriting lows, with Australia’s two most popular student destinations, Sydney and Melbourne both having 0.9% vacancy rates as of September 2023. This is a considerable drop from December 2021 when the vacancy rate was 2.6% for Sydney and 3.2% for Melbourne. 

Unsurprisingly, the reopening of Australia’s borders to international students in early 2022 led to growing demand for housing. This was exacerbated by an influx of students from China in January 2023, after the Chinese Government announced it would no longer recognise international degrees obtained via online learning.  

Considering China is one of Australia’s top source markets, this snap decision led to massive accommodation demand in a relatively brief period. Prior to this, in the year preceding September 2022, overseas migration hit over 300,000, with most of those entering the country doing so with a temporary visa. As noted in the Domain Rental Report, such inflows have been substantial drivers behind rental demand. 

According to Emerging Futures 4, 51% of prospective students said they intended to live in purpose-built student accommodation (PBSA) on or near campus, compared with over 48% of respondents who intended to live in some form of off-campus private accommodation. However, the reality is much different once students arrive, with just over 20% of currently enrolled students saying they live in PBSA, whilst the majority (77.4%) state they live in off-campus private accommodation.

Although PBSA plays a key role in ensuring students have secure accommodation tailor-made for their demographic, it can be quite costly for many international students. 

“In most cases, the cost is too much for students who have many financial demands for their limited budget,” said Ms Gilson. 

Additionally, lack of PBSA can often force international students to instead seek out accommodation in a highly competitive private rental market. Prominent figures in the sector, such as Torie Brown, the Executive Director of the Student Accommodation Council told SBS that federal and state governments needed to prioritise building new student accommodation to help students avoid having to enter the private rental market. Ms Brown said helping builders overcome such barriers as foreign investor taxes and “cumbersome planning processes” would be important.  

In a report by Professor Alan Morris of the University of Technology Sydney, which explored international students in the rental market, it was stated that while Australia had successfully expanded its international student recruitment efforts over the previous 30 years, it had also failed to proportionally expand its affordable student accommodation in response, leaving many to navigate the “poorly regulated and expensive” private rental market. Professor Morris concluded that “a concerted effort by government and education institutions” to provide this demographic with affordable and secure housing could help to alleviate such burdens and in turn give students more time and energy to focus on their studies, echoing the comments made by Ms Brown. 

To make such secure and rent-controlled accommodation more available, Ms Gilson from ISANA suggested institutions could start offering PBSA as part of their scholarships, as opposed to purely offering academic oriented scholarships.  

“Allowing international students to focus on securing PBSA instead of entering the difficult private rental market could help ensure they aren’t subject to unfair discrimination,” said Ms Gilson. “PBSA can reduce the animosity whipped up in the community by certain commentators about international students taking or driving up the price of their accommodation.” 

A potential hurdle to providing PBSA as a scholarship option however is that many on and near campus housing options, including PBSAs, are owned and operated by third parties, not by the institution themselves. This makes coordinating and guaranteeing availability as part of scholarship scheme potentially tricky from a cost-recovery perspective unless built into the services agreement between the institution and the PBSA provider.  

Even after successfully entering the country and securing accommodation, international students face challenges with everyday living costs, and unsurprisingly, this demographic uses part-time work as the primary means of supporting themselves while studying abroad. The Australian Government’s Genuine Student Test (GST), which was introduced in March 2023, also requires prospective students looking to study in Australia to describe their capacity to financially support themselves while studying.  

IDP’s Emerging Futures 4 showed nearly 77% of respondents were planning to work or were currently working alongside their studies. Responses were far more varied regarding how long prospective and current students either intended to work or were currently working over a fortnight. Just under 33% said they worked 10 to 20 hours every fortnight, while 23% answered 31 to 40 hours, and roughly 12% said over 40 hours. 

A student’s ongoing balancing act between studies and subsistence was further highlighted in February 2023 when the Federal Government announced plans to scrap the unlimited working hours for international students. This means students will no longer have the means to save as much money as possible.  

ISANA President, Sharon Cook, said current students’ biggest concerns are finding a job and completing their degrees, and the limit on working hours could only worsen financial burdens on international students.  

“Unlike their domestic counterparts, international students are limited to 48 hours [of work] per fortnight, must study full time and have satisfactory progress, so they have limited ways to increase income to respond to rising cost of living,” said Ms Cook.  

“Additionally, it is important that students are still allowed to undertake accredited internships without it being deducted from their fortnightly work hours. This is key in attracting and retaining students and allows students who would normally need to count their internships hours in their 48-hour fortnightly limit to undertake an internship at any time of the year as part of their course, and to continue with their part-time work whilst doing so.” 

While the situation for this demographic may appear difficult at present, the general sentiment seems to be rather positive. Emerging Futures 4 found 67% of respondents were confident they would have enough money to live during their studies, compared to 22% who weren’t sure and 11% who were not confident. However, respondents were somewhat split on how they expected inflation to impact their overseas studies, with 56% of prospective students saying the recent cost of living issues had made them reassess their plans to study abroad, compared with 44% who said it hadn’t. While this suggests international students are not universally repelled by cost-of-living challenges, it still shows lingering concerns regarding financial capabilities while undertaking education abroad.

Despite tight economic conditions not being expected to ease until 2025, there are some solutions still within reach. Financial support services are readily and widely available for international students who meet an institution’s eligibility criteria, whether in the form of loans or assistance in finding part-time work. Many institutions also offer scholarships, such as Monash University’s International Merit Scholarship or UNSW’s International Student Award.  

Ms Cook said it is important institutions actively promote their support services to incoming students. 

“Institutions need to ensure students access support early. Through speaking with education provider support staff, issues with tuition fees can be addressed and stress on students reduced before it becomes a major problem,” said Ms Cook.  

As for accommodation, the Federal Government has already begun implementing measures which could help to build more PBSA. This includes those outlined in the 2023 Federal Budget, such as increasing the rate for the capital works tax deduction and reducing the final withholding tax rate on eligible fund payments on build-to-rent projects. The Budget states such measures will expand Australia’s housing supply and provide incentives for greater investment into the build-to-rent sector - of which PBSA is a large part. Furthermore, as previously outlined by Ms Gilson, institutions including PBSA as part of scholarship offerings could provide a greater number of international students access to secure tailor-made lodgings. For now, however, demand is so great that on-campus housing is nearly always full.

Ensuring incoming students are well-versed in the economic climate of their destination may also help them to plan and prepare to an even greater degree. Emerging Futures 4 found nearly 57% of respondents had “some general knowledge” about the cost of living in their chosen destination, compared with 13% who had “little to no knowledge”. Only 29% said they were “highly knowledgeable”, suggesting more prospective students must take the time to learn about the cost of living in their chosen destination. 

“Students should be pointed towards cost of living calculators, and immigration requirements regarding fees,” Ms Cook explained. 

“Information regarding how easily students can find work upon arrival in Australia, and the wages they can expect, not based on average income but rather actual wages, would be very helpful for them to understand the likelihood of being able to fund their cost of living with earnt income.”    

Institutions should include up-to-date information on the cost of living and accommodation as part of their recruitment and marketing strategies, allowing international students to better prepare and address such challenges, and dedicate more time and energy towards their studies. 

While these solutions may be a step in the right direction, they are not silver bullets for such a far-reaching and ubiquitous issue. High inflation rates are seemingly here to stay until at least 2025, and times will be tough for international students unless governments, sector bodies and institutions take action - construction project tax deductions, wider access to PBSA, greater communication of realistic living expenses, and greater awareness of support services are a start. 

Whilst high, Australia’s inflation rate is still lower than that of other key English-speaking destination markets, such as the UK. More stable inflation rates in the near future and favourable exchange rates could prove beneficial to ensuring Australia retains its reputation as a top destination market, and even boosts its popularity. 

Furthermore, it will be interesting to see the Federal Government’s delivery of the Australian Universities Accord, expected in December this year, which will provide us with greater transparency and understanding on how they plan to bolster higher education, including the lives of international students. In the meantime, the aforementioned initiatives may help current and future students focus less on financial struggles, and more on their educational experience.