"The biggest disappointment during the month came not from a company but from the Federal Government’s proposed introduction of a capping regime for new overseas student commencements. We have exposure to this market through our positions in EDU Australia (ASX:EDU) (~1.5% position) and AKG (~0.5% position). We don’t usually make political commentary, but this poorly conceived public policy to us defies any common sense. Education is Australia’s fourth-biggest export industry after iron ore, gas and coal, worth $48bn in 2023, which this legislation threatens to significantly disrupt. As the AFR noted, the proposed caps are a “massive over-reach by a government trying to solve a political problem – perceptions that students add to the rental crisis – by scapegoating a group who can’t vote and have no voice”. To illustrate the economic impact, international students generated nearly $15bn for the Victoria economy in 2023, supporting around 63,000 jobs, and not being a mining state, is Victoria’s largest export industry. According to the Victorian Treasurer, the changes put at risk almost $5bn worth of revenue and some 12,000 jobs in Victoria alone.
To make this even more frustrating for EDU, after four challenging years post COVID, EDU were just picking up momentum. EDU reported revenue up 64% to $17m for the 6 months to 30 June, and a return to profit. As a reminder, EDU is supporting and educating Australia’s next generation of early childhood educators, allied health workers and aged care professionals – occupations that Australia is desperately in need of, and that the government had previously identified as wanting to attract and retain on permanent residency pathway. However, the proposed legislation will allow for only 200 new overseas students to enrol in 2025, compared to greater than 1,000 EDU is expected to enrol this year through their Ikon colleges. If this cap is maintained for three years, EDU’s cohort of Bachelor of Early Education international student graduates will fall by more than 80%.
We are all for well-constructed public policy that controls shonky operators and low-quality courses. But ill-thought-out legislation that hurts the best performing and highest quality operators the most is hard to fathom. We hope commonsense will prevail and there will be changes prior to the legislation receiving senate approval. Already we are seeing increasing signs of push back against this poor policy, and we are hopeful that more positive policy settings that support high quality operators like EDU will emerge."
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