International student restrictions may dampen economic recovery, CBA says

Education is a lucrative export for the Australian economy, raking in a whopping $51.5 billion in 2025. It is Australia’s fourth largest export category and made up 40.8 per cent of total service exports in 2024.

Commonwealth Bank (CBA) associate economist Lucinda Jerogin wrote that education exports had rebounded strongly since pandemic lockdowns, but warned that recent government policy had tempered the outlook for future education export growth.

“Tourists and international students play a significant role in the Australian economy, contributing to demand through spending on goods and services,” she wrote.

“Growth in education exports is a tailwind for economic activity. However, changes to government policy in recent years has called future education export growth into question.”

In recent years, the government implemented numerous measures to curb the influx of international students in a bid to alleviate housing demand amid an ongoing housing crisis. These included student enrolment caps and visa slowdown orders.

In his May 2024 budget speech, Treasurer Jim Chalmers said international student enrolments would be capped based on student accommodation availability.

“If universities want to take more international students, they must build more student accommodation,” Chalmers said.

“We will limit how many international students can be enrolled by each university based on a formula, including how much housing they build.”

Specific details regarding how universities would be expected to prove their efforts to boost student housing were yet to be announced, Jerogin noted. In 2023–24, a total of 5,178 student accommodation rooms were approved for construction across Australia.

Headwinds in the construction sector could make it difficult for universities to reach housing commitments, she added.

A quicker-than-expected slowdown in international student arrivals could pose headwinds to Australia’s economic recovery, Jerogin warned. Not only was education a significant service export, but international students also provided important labour supply to some sectors.

“A greater share of international students work in the accommodation, food services and retail sectors. This contribution has been important to support businesses facing shortages in a tight labour market post-pandemic.”

“Announced international student restrictions have the potential to deter a larger-than-anticipated number of foreign students from studying in Australia. This could place pressure on an only gradually loosening labour market.”

Net international student arrivals had drifted lower since the 2023 post-pandemic surge. In June 2025, net international student arrivals rose by 0.4 per cent. On a rolling annual basis, net international student arrivals sat at 79,520, just above the 2015–19 June average of 76,524.

“Since the mid-2023 peak, net long-term arrivals into Australia have slowed sharply. Data for June indicates net arrivals are sitting at 254,980 in rolling annual terms,” Jerogin wrote.

“In the March Budget, the Government revised its forecasts for net overseas migration to now expect a rise of 335k in FY25 before slowing to 260k in FY26 and 225k in 2027.”

Net overseas migration numbers for the first quarter of 2025 were due mid-September and would be worth watching, according to Jerogin. A faster-than-expected reduction in population growth could pose a headwind to the economic recovery.

“We are expecting a domestic consumer spending recovery in Australia, but challenges with student and tourism numbers mean the recovery is likely to be driven by local sources,” Jerogin noted.