Dollar value only tells part of the story

LIKE many Australians, I can say I have been a great beneficiary of education; from Highgate Primary to Harvard University, and with many family members employed as academics, teachers and researchers in the education system.

But I am also a beneficiary of international education. When I studied at Adelaide University, the Singapore government somehow sent their best and brightest – many of whom were destined to study nuclear physics at Oxford – to my home town to enrol in economics. They became not only my classmates and tutors but I also lived in residence with them at Lincoln College in North Adelaide, and was joined by a cohort of Malaysians, Indonesians and Thais. As a result, there were some great ‘externalities’ or ‘spill over’ benefits to be gained.

So when I was sitting in the classroom for some highly technical subjects, like mathematical economics and econometrics, I had some technically gifted classmates to help raise my standards; and luckily when it came to writing essays and the almighty honours thesis, I could return the favour with my comparative advantage in humanities as some of my class-mates struggled. So there truly are gains from trade.

But my anecdotal case of benefitting from higher education is not isolated. From the Colombo plan in the 1940s onwards (many of my class mates were Colombo plan students as were some of their parents), international education has blossomed in Australia.

According to the International Education Association Australia, international students now contribute 15.5 per cent to the university sector revenue, which directly provides 135,000 jobs. The education export sector is worth $18.6 billion (2009 data) to which universities contribute around $10.4 billion. In terms of export dollars earned and workers employed this industry is a big deal.

But while the numbers are important – and as a major service export for Australia, education is a crucial economic sector in terms of global engagement – international education matters on a whole range of levels.

Firstly, even today, when global and domestic commentary on Australia focuses on our traditional strengths in resources and agriculture, an important part of this story includes the role played by the education services sector in Australia’s global engagement. This has occurred particularly given the rise in commodity prices and the strong terms of trade.

But the success of the resources and extractive sectors themselves are underpinned by a comparative advantage in education – with services to mining, services to agriculture being important inputs. Furthermore, in all ‘rocks and crops’ industries, a range of services industries including education and training firms has been spawned.

I see this everywhere when I travel around the world, from mining training businesses from Perth in Siberia and Brazil, to wine marketing and technology training businesses from SA’s McLaren Vale in Argentina, and agribusiness colleges in Qatar and the United Arab Emirates.

Secondly, even when looking at export volume growth – abstracting from commodity price changes – services export growth has been substantial over the decade.

The resources sector earns Australia large export values because of commodity prices but services exports, including education, still perform well. Services as a whole matter, because even if they provide 22 per cent of exports, they also account for 40 per cent of Australia’s international business sales, 80 per cent of GDP and 85 per cent of employment.

Thirdly, investments in the education sector underpin the whole exporting community in Australia. Austrade and Australian Bureau of Statistics research shows that, as Australia opened up its economy, exporters invested more in education, training (both formal, vocational and on-the-job) than non-exporters and hence were able to raise average levels of productivity and innovation, and pay higher wages and provide more fulfilling careers. This matters especially at a time when competitiveness is an issue with the Australian economy.

With such confidence in Australia post-GFC, real competitiveness can only improve through advances in productivity gained through investment in education. Hence a strong higher education sector is in the interests of all exporting sectors and all those engaged in the global economy. Because as Nobel laureate Paul Krugman, says: “productivity isn’t everything but in the long run its nearly everything.”

Finally, it’s the most important question of all, people. As ‘nation brand’ expert Simon Anholt pointed out recently, very few people will actually ever come to Australia but they will learn about Australia from the experience of both tourists and students. And students are here for a longer time, on average, than tourists so their experience is very important in how Australia is viewed.

This takes me back to my days at Adelaide University. A number of my Singaporean and Malaysian classmates had fond experiences of their time in Australia and this is important to how Australia and Adelaide is viewed in South-East Asia.

• Tim Harcourt is the chief economist with Austrade.