Unmasking the Headline Figures

In early 2026, Universities Australia (UA), the peak body representing Australia's 39 universities, issued a stark warning about the sector's financial health. Despite collective operating surpluses grabbing headlines, UA emphasized that these figures obscure deeper vulnerabilities. For 2024, the nation's universities reported a 4.7 percent aggregate operating surplus amounting to approximately $2.1 billion across 43 institutions. This marked an improvement from previous years' tighter margins, yet UA CEO Luke Sheehy cautioned that such numbers stem from one-off factors like favorable investment returns and delayed inflation adjustments rather than systemic strength.

The reality paints a more fragmented picture: 13 universities operated at a deficit in 2024, down from 26 in 2022 but still signaling persistent strain. Moreover, 22 institutions grapple with weak liquidity, where current liabilities outpace assets. Expenses surged by $3.5 billion in a single year, with $2 billion attributed to salaries and associated costs. This juxtaposition of apparent prosperity and underlying fragility underscores why UA describes the sector as standing on 'weakened financial foundations.'

Decade-Long Funding Erosion Exposed

Government funding for higher education in Australia has eroded in real terms over more than a decade, exacerbating the challenges. Real funding per Commonwealth Supported Place (CSP)—where the government subsidizes undergraduate domestic students—has declined by around six percent since 2017, even as student numbers have grown. CSPs, fully funded until 2017, now receive less per student, forcing universities to bridge gaps through other revenues.

Policies like the Job-ready Graduates package, introduced in 2021, shifted costs by increasing student contributions for some fields while reducing government subsidies by about six percent overall. Total real CSP funding dropped 13.4 percent from 2013 to 2023, despite a less than seven percent decline in places. UA's analysis highlights how these changes, combined with stagnant direct grants post-2014, have left universities spending more from general funds to maintain operations.

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International Students: A Volatile Lifeline

International student fees represent just over a quarter of university revenue, making the sector highly sensitive to policy shifts and global markets. While revenue recovered to 2019 real values by 2024—reaching $12.3 billion, up 21.5 percent from 2023—recent caps and visa restrictions threaten this stream. Federal measures, including Ministerial Direction 107 and a 2025 cap limiting new commencements to 270,000 (145,000 for public universities), have slowed growth. Visa grant rates fell to 84.2 percent in 2023-24 from over 94 percent pre-pandemic.

Dependence on fewer source countries amplifies risks: Chinese students comprise 36 percent of commencements, down slightly from peaks but still dominant. Regional universities, less attractive to internationals, suffer disproportionately. UA warns that without policy stability, this $52 billion export industry—supporting jobs nationwide—could falter, directly hitting university budgets.

Surging Costs and Operational Pressures

Inflation nearing eight percent, wage pressures, and infrastructure demands have driven costs skyward. Salaries alone rose by $2 billion in 2024, while maintenance, cyber defenses, and digital upgrades add burdens. Capital expenditure plummeted from $4.5 billion in 2019 to $3.86 billion in 2024—now under 10 percent of total spending—with seven universities allocating less than five percent of revenue to facilities.

Since the abolition of the Education Investment Fund, universities self-fund upgrades from operating surpluses, a task growing harder amid deficits. Critics point to inefficiencies, but proponents argue external shocks like COVID-19's 'bullwhip effect'—over-recruitment followed by demand drops—necessitate recalibration.

Universities Australia's full statement details these pressures, urging budget reforms.

Job Cuts Sweeping the Sector

Financial strains have triggered widespread redundancies, with over 2,500 jobs projected lost since mid-2024 across at least 14 universities. Full-time equivalent reductions include:

• Australian National University (ANU): 638 positions
• University of Technology Sydney (UTS): 400 jobs
• Western Sydney University (WSU): 300-400 jobs
• University of Wollongong: 277 jobs
• University of Southern Queensland (USQ): 259 jobs
• Griffith University: ~200 jobs

Smaller cuts at institutions like James Cook (50), Macquarie (50-60), and La Trobe (28-55) add up. Regional and mid-tier universities bear the brunt, targeting administrative, arts, and support roles. Unions decry opaque processes and workload shifts, while management cites sustainability.

Prospective academics should check higher ed jobs for openings amid transitions.

Divergent Perspectives from Stakeholders

UA and vice-chancellors frame cuts as necessary for long-term viability amid policy volatility. Luke Sheehy stresses universities as 'national assets' needing stable footing. Conversely, outlets like the Sydney Morning Herald label it 'simply poor management,' noting Go8 powerhouses like University of Sydney ($545M surplus, $5B assets) and Melbourne ($272M surplus) thrive via philanthropy and investments.

Unions, via the National Tertiary Education Union (NTEU), argue overestimations and governance failures prioritize real estate over staff. Experts like Nous Group's Zac Ashkanasy see recalibration post-COVID, while policy analysts blame government reforms. This multi-perspective view highlights uneven recovery: Go8 surpluses average $319M versus $26M elsewhere.

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Research and Innovation Under Threat

Universities cross-subsidize research at $1.06 own funds per $1 income, with Australia's R&D at 1.7 percent GDP—a 20-year low. Government share below two percent of expenditure declines further. Competitive grants grew modestly, but ARC funding fell 20 percent real terms since 2014. Capital shortfalls hinder labs and facilities, risking global competitiveness.

UA's pre-budget submission calls for OECD-average investment and Horizon Europe access. For researchers, research jobs remain vital despite pressures.

Towards Sustainable Solutions

UA proposes targeted 2026-27 budget reforms: scrap highest Job-ready fees, expand CSPs with restored per-student funding, sustain international growth, cut red tape, revive infrastructure funds, and boost PhD stipends. Broader strategies include diversification beyond internationals, efficiency via AI, and public-private research partnerships.

Balanced management—evident in UNSW's turnaround from debt to $131M surplus—offers models. Policymakers must address volatility to prevent deeper crisis.

Photo by Martin David on Unsplash

Outlook and Implications for Higher Education

Without intervention, 2026 funding cuts loom, potentially accelerating job losses and course reductions (e.g., teaching, languages at Newcastle, CSU). Students face fee hikes; staff uncertainty; economy misses skills pipeline. Yet opportunities exist: robust exports, innovation potential.

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UA's 2026-27 pre-budget submission outlines paths forward.