Market overview

IbisWorld found that of the 500 industries in the Australian economy, 79 have medium exports – but only 35 of those are keeping pace with higher education Over the five years to 2010-11 the higher education industry value added is expected to grow by 3.2 per cent per annum, faster than the overall economy as measured by GDP growth of 2.9 per cent per annum. IBISWorld forecasts industry value added will grow by 4.6 per cent per annum over the five years to 2015-16. Again, this will be higher than forecast GDP growth estimated at an average 3.8 per cent per annum. There has been considerable innovation in the courses offered by institutions and the methods by which they are delivered. This is primarily being achieved through technological developments. Universities have particularly sought to offer flexible courses to meet the demands of students pursuing study and work commitments at the same time. These changes allow universities to reach a larger market. Open Universities Australia is a prime example of this. Higher education providers are also offering lower-cost courses and new pathways into undergraduate and postgraduate courses. While international students have been a growth market for universities in the past, there are signs this market is now starting to slow. In the 10 years to 2009-10, revenue earned from international students (classified as exports) has grown from an estimated 12.4 per cent of total industry revenue to 17.8 per cent. The number of international students enrolled in Australian higher education institutions grew by 15.3 per cent per annum between 1998 and 2003. By comparison, growth slowed from 2003 to 2008 to a relatively low 6.9 per cent per annum. Greater international competition is slowing enrolment growth. It will be important for higher education providers to diversify the source of international students, which is currently dominated by Asia and within a small number of fields (i.e. predominantly commerce and engineering). The industry is further supported by an underlying consistency of domestic demand due to community perceptions that higher education is necessary to secure and retain employment. Products and services • Postgraduate programs by coursework have grown in popularity. Between 2000 and 2005, the number of students studying their masters by coursework rose at an average annualised rate of 19.9 per cent and doctorate coursework students increased by 22.7 per cent per annum. However, demand may be peaking for the doctorate by coursework, which experienced a 6.5 per cent decline in enrolments in 2008. Postgraduate studies are seen as an advantage within the services sector of the job market, where a single graduate degree is no longer a point of differentiation. This may likely explain the strong growth in postgraduate studies over the five years through 2009-10. • Greater numbers of students are taking associate degrees. The number of students doing so grew by 293.9 per cent between 2005 and 2008 to 8393 students. Enrolments in other undergraduate degrees also grew strongly in 2008, up 16.1 per cent on 2007 figures. • The industry can also be segmented via the field of study. In 2008, 29.8 per cent of total enrolments in public universities took management and commerce studies. This field of study is among the fastest growing in terms of enrolments, possibly because the skills learned are applicable to a wide range of occupations within the services sector. Society and culture studies were second most popular, with 21.3 per cent of enrolments. Health accounted for 13.2 per cent of all enrolments in public universities, up from 10.6 per cent in 2005. Natural and physical sciences drew 7.3 per cent of total public enrolments. The market for higher education can be segmented by various methods. The easiest segmentation is by the home residence of the student. Students with overseas residency are forecast to account for 24.8 per cent of total students in 2010 (up from 16.9 per cent 10 years earlier), with just under one-third of these overseas students enrolled at Australian universities’ overseas-based campuses. Full-time students make up the bulk of students (68.8 per cent in 2008). Full-time students are typically persons who completed secondary education immediately preceding enrolment at university. Students at non-government schools are more likely to complete secondary education and attend university. Part-time students are predominantly studying while in employment. In 2008, part-time students accounted for 31.2 per cent of student enrolments. Mode of attendance can be broken into internal (taking studies on campus), external (via correspondence) and multi-modal (a mix of both). Internal was the most common form of attendance: 80.4 per cent students took courses this way, and within this group, approximately 75 per cent studied full-time. A further 12.4 per cent were external students and more than 80 per cent of these students chose to study part-time. Multi-modal attendance is becoming more popular – the number of students choosing this option increased 6.9 per cent from 2007 to 2008 to represent 7.2 per cent of students. Interestingly, almost three-quarters of multi-modal students studied full-time. In 2008 approximately 55 per cent of students were female, a proportion that has been growing over time but which varies significantly between disciplines. Men tend to dominate in the trade fields (vocational education) and this may explain their under-representation in tertiary courses. The best-represented age group for higher education students is the 20-24 age bracket, 33.9 per cent of students fell within these ages in 2008. Approximately 27 per cent of total students are aged 30 and higher. There has been significant growth in the number of students aged 30 years and over during the past five years, partly due to increased demand for higher degree and postgraduate courses. Australia has a much stronger record of lifelong learning than other OECD countries. Far more adult Australians participate in formal education than overseas. Australia has three times the OECD participation rate for people in the 30- to 39-year-old age group and five times the OECD rate for the 40-plus group. IBISWorld identified the following as the key success factor for the sector • Ability to take advantage of government subsidies and other grants - Public universities face funding penalties if they fail to meet or exceed their undergraduate Australian student quotas. • Use of specialist equipment or facilities - Good facilities, including accommodation, lecture theatres, laboratories and library resources are important. For external courses, strong delivery systems, resources and support are key to success. • Having a good reputation - A good reputation is usually developed over time and is based on the calibre of academic staff, research output, age of the institution, quality of courses and employability of graduates. • Ability to diversify revenue avenues - The ability to attract research funds and revenue through consultancy services will improve an institution’s ability to remain competitive. As government funding decreases, finding alternative sources of revenue will become increasingly important. • Market research and understanding - Institutions need to provide current, relevant courses that respond to the needs of students and their potential employers. Responding to trends in education has identified a significant market of students wishing to take online courses. • Effective cost controls - Over the longer term, competition in the industry is expected to increase and a competitive cost structure will be important. See related stories Market overview Snapshot of university and other higher education in Australia October 2010