Most of our big export industries do their business out of sight of city dwellers. Mines are dug and ore extracted without stirring the dust on suburban streets. There is one such industry, though, whose major commodity is visible in our capitals. That commodity is human beings. They are the confused young people trying to serve us in low-rent fast food outlets. They are the lonely kids on city streets or sharing rooms – and even beds – in crowded houses in the suburbs. They are an underclass in the labour market, with working conditions that undermine those for all lower paid workers.

Only a few years ago you could see them being preyed upon at major city railway stations. Touts would hand out leaflets urging them to approach certain migration agents. The noticeboards at TAFEs and universities featured the same gaudy promises: ring this number, email this address and you too could live permanently in Australia.

Students who took the bait would be encouraged to drop their existing courses and enrol at dodgy institutions that held classes in the evenings and on weekends. This was in tacit recognition of the fact many students were working much more than the 20 hours per week their visas allowed. These colleges sprang up like mushrooms to provide qualifications designed for one thing only: to provide whatever piece of paper would assist students in getting permanent residency. Governments were complicit in all this – ignoring the exploitation and the breaches of the law.

This is only part of the picture, of course. Many international students have good experiences. Many return to their home countries happy with their study, and facing better futures because of their Australian qualification. But there is also a dark side. The recent history of international students in Australia is about the mishandling of a major export industry on a scale that would constantly fill the front pages of the newspapers if it were any other business. Government action created this industry, and may now be destroying a large part of it.

This story is also about the government almost losing control of our immigration make-up – and not because of unauthorised boat arrivals or illegal immigration or anything of that kind. Rather, the loss of control was due to deliberate policy settings that had unintended consequences, though those consequences were foreseeable and should have been foreseen.

Nor is the bungling over. The international student industry has grown by an astonishing 12% per annum since 1990, but in the first half of this year the number of commencing students was down 22%. This, according to the experts, is just the beginning; the full effect won’t show up for another two years. So far, the decline is mainly occurring in vocational training institutions and private colleges – and the good operators are being hit along with the not so good. At least 20 have closed since the beginning of 2009. But it is also occurring in the higher education sector, which makes this an issue about our international competitiveness at a time when national self-determination relies more than ever before on intellectual capital.

Numbers in the English language colleges that prepare international students for university are well down, meaning that universities themselves will be hit next year. Underfunded by governments, our universities have come to depend on the money international students bring. Some institutions already have plans to prop up whole devastated faculties; for others, it is not only a faculty but the entire organisation that will be in trouble.

On average, 16% of all universities’ revenue comes from international students. For some, such as the University of Central Queensland and the University of Ballarat, international students account for over one-third of revenue. International students make up an average of 29% of onshore university students; for some individual universities, this figure is more than 60%.

The University of Melbourne’s Simon Marginson, professor of higher education, says that if present immigration policy settings persist, the numbers of international students in Australia could drop by 40% by 2012 and 50% or more by 2014. “Higher education will be the sector least affected but it will be affected … Many of us would like to see institutions less dependent on international students, and operating at lower levels of enrolment. But not this way … The revenues will not be replaced, unless Canberra bails out the sector. We will still be just as dependent on international students, but we won’t have them,” Marginson says. If there are no changes, and Marginson is correct, it is hard to see how the higher education sector can survive in its present form.

Marginson claims the decline in international student enrolments was entirely foreseeable: “Every step in this was foreseeable. It is government negligence.” The fault lies with ministers from both sides of politics but also with government departments. One particular issue has been the scraps occurring between the Department of Immigration, with its compliance focus, and the Department of Education, with its eyes on the numbers and the dollars.

And in recent months, as the numbers plummeted and the implications became clear, the government has been distracted. Kevin Rudd ground out his last days as prime minister before being shafted by the minister for education, Julia Gillard. Then we entered the caretaker period that seemed to never end. In the aftermath, the former minister for immigration, Chris Evans, became minister for tertiary education. Depending on your point of view, it is either gamekeeper turned poacher or a useful switch that will help the new government to see both sides of the conundrum – a problem to which there is no easy solution because, having spent almost 15 years deliberately forging a link between studying in Australia and migrating to Australia, we are now trying to break that link.

Plenty of people think it can’t be done.

The story of international students in this country is a long and mostly proud one. In the 1950s Australia offered education under the Colombo Plan as a means of international aid. Thousands of students from Asia were sponsored to study or train in Australia. The result was one of the happiest chapters in the history of our relations with the region. The Colombo Plan brought East and West together at a time of enormous political tension. It was seen as a means of tempering racism and winning the battle of hearts and minds during the Cold War. Most of the students returned to their home countries, many taking up leadership positions.

Immigration was an entirely separate area of policy, with its main aim being to build the nation’s population for defence. Then, through subsequent decades, the emphasis shifted to humanitarianism. The intake of refugees from Vietnam in the ’70s, together with family reunion policies brought a practical end to the White Australia Policy. The outcomes for these migrants were mixed. More than one generation later, descendants of Lebanese and Vietnamese migrants still, on average, have lower incomes and lesser employment prospects than longer established Australians.

This fact helped to justify the profound policy shift undertaken by the Howard government in 1996. Under Howard, Australia’s immigration program was mainly about trying to get good economic outcomes for Australia, and the country entered the highly competitive business of trying to attract the best migrants to come here. The opportunity to enter Australia as a student and gain skills here was seen as Australia’s drawcard, part of its competitive edge. So it was for the first time that the Howard government linked education and migration. By 2007 when Howard lost power, Australia was taking around 140,000 immigrants per year – the highest intake in 20 years. The great majority of permanent places (97,000) were allocated to skilled migrants, and of these 40% were going to people who were already in Australia – most of them having entered as international students.

The government agency Australian Education International (AEI) began marketing Australian education and training in India and China in 1998. And the process used to assess applications for migration was modified to grant extra points to people who had an Australian educational qualification. The Department of Education, Employment and Workplace Relations introduced the Migration Occupations in Demand List (MODL); upon its set-up the Department of Immigration moved to grant people with skills listed on the MODL more points, and processing priority.

Conditions of entry to courses were liberalised. Students were encouraged to do foundation English language studies before beginning other courses and English language colleges, some of them attached to universities, sprang up to satisfy the demand. The result was extraordinary growth: a 27% increase in Offshore Student Visa Grants between 2001 and 2003. But this was just the beginning.

Education began to be talked about as a major export industry. Almost every news story on the issue – and certainly media releases from the private vocational education industry and the AEI – described it as the country’s third largest export industry, behind coal and iron ore. It was almost a mantra. Such language made the industry beyond reproach, politically unassailable. Few commented on the implications, namely that human beings were being compared to inert minerals shipped by the tonne. Perhaps the language should have sounded a warning.

In any case, the numbers were questionable – but were not questioned, at least not by anyone in government. The academic Bob Birrell from Monash University’s Centre for Population and Urban Research recently published a paper effectively accusing the AEI and the industry of using distorted figures. The dollar figures they quote for the value of international students to the Australian economy are based on Australian Bureau of Statistics (ABS) assumptions that each student spends a total of $49,654 per year on goods, services and fees. But this, Birrell says, is well beyond the capacity of most domestic students, let alone those who have arrived from overseas, particularly given there has been an increasing number of students coming from less well-off families in India and China in recent years. Almost anyone who knows an international student can see that they are surviving on much less, and indeed the literature universities and colleges distribute to prospective students advises them that they can survive on as little as a third of the ABS figure.

Birrell puts the real value of the international education market at about half the $15 billion quoted by government and industry in 2008, and used to make the industry politically untouchable. In other words, it is still big but may be nowhere near as big as claimed. Bruce Baird, the Liberal MP who was, after his retirement from politics, called in to help sort out the mess, says today that the government was “probably mesmerised by the dollars” when it introduced one more significant policy change – in retrospect a step too far.

In May 2005, under the watch of the former Immigration Minister Amanda Vanstone and Minister for Education Brendan Nelson, the number of occupations on the MODL was greatly expanded to include many comparatively low-skilled occupations, including cooking and hospitality. Already, there were opportunists in the marketplace. Now they boomed. Dodgy colleges sprang up all over the country. Never before had there been so many opportunities to study cooking, hairdressing and hospitality in Australia, and never before had so many young people from overseas apparently wanted to learn to be cooks and waiters here.

The federal government had delegated regulation of private vocational colleges to state governments. They failed at the task. Some colleges barely disguised the fact they were façades for immigration ambitions. Most worryingly of all, there were reports of scams in which overseas agents worked with colleges, landlords and employers to bring students to Australia and provide them with work, accommodation and notional study, all on the promise of eventual residency – and with the student being exploited at every step.

The human cost was climbing. Research by Simon Marginson found that, while many students were having a good experience, few made Australian friends, many were disappointed in their courses and “on the whole their lives [were] more marginal, more lonely and less informed” than those of domestic students. Many were living in shared households of up to 16 people that were, in reality, boarding houses, but were not inspected or regulated as such. Almost half of those interviewed had experienced hostility or prejudice.

The changes to the MODL tapped into new markets of would-be students from poor families, who were desperate to migrate. Total international students in all sectors reached 632,000 in 2009 – phenomenal growth of 16.8% on the previous year’s figures. China and India together accounted for almost half of new enrolments. But this was the boom before the crash.

The Rudd government initially continued the emphasis on increasing skilled immigration. Then, after the Global Financial Crisis of 2008, there was a reverse. Skilled migration quotas were cut several times, with the justification of protecting local jobs. A new “demand driven” system was introduced, with priority being given to those who were sponsored by employers. These applicants would now leapfrog over students already in Australia who had gained qualifications included on the MODL. Students completing MODL-related courses would now have to find an employer to sponsor them if they wanted to be prioritised.

The minister for immigration, Chris Evans, announced that he wanted to make sure the system was not giving international students “perverse incentives” to study vocational courses when they had no intention of working in those occupations. It is hard to imagine what it must have been like for international students hearing those words. By now, a large part of the industry had been built on precisely such “perverse incentives”, with tacit government co-operation. There was despair, and even reports of suicides.

Bruce Baird was commissioned in August 2009 to conduct a review of regulation in the sector. Today, he sheds some light on the reasons for the sharp alterations in policy settings. Chris Evans, he says, was deeply worried by the way things were heading. There were 100,000 students who had done courses on the MODL and applied for permanent residency, with every likelihood of success. If allowed in, they would fundamentally alter Australia’s migration intake. And with more than 600,000 international students enrolled, the wave could only increase. Research suggested that these students were frequently unsuccessful in getting jobs that reflected their qualifications; often, their English language skills were simply not up to it.

Baird wrote in his report: “I spoke to many students … and I know that if given the opportunity they would make a great contribution to this country … The problem is how some providers and agents are exploiting these students and how the migration policy settings have skewed provider course offerings, channelling students into courses and occupations that do not necessarily suit students’ skills and expertise.”

Instead of delivering skilled migrants ready to contribute, the Howard government’s policies had led to a situation where Australia was about to accept large numbers of immigrants, many of whom were impoverished and had gained sometimes dubious qualifications as a means to an end. There were also, of course, many students who had gained worthwhile qualifications from reputable institutions but, as Baird wrote, the whole system was under strain from the distortions caused by government policies. The government also believed there was a growing risk of backlash in the community. The violent attacks against Indian students in 2008 and 2009 were only the most visible evidence.

Simon Marginson puts the reasons for the sharp change in policy less charitably. He believes governments crumbled to racism. “The fundamental reason why the industry is in trouble is migration resistance in the electorate. This has moved from the Hansonite fringe to the national heartland because both the Coalition and Labor have lacked the wisdom and courage to face it down. They have pandered to it instead. And the industry has no traction in public. Job loss in education simply is not an issue as yet.”

From late 2008 the skilled migration program was cut repeatedly with the justification continuing to be the protection of local jobs. Applications by students who had completed their courses were delayed. More than 150 migration agents had action taken against them due to evidence of fraud or inactivity. The government announced that, to detect fraud, many more applicants for student visas would be interviewed face-to-face, rather than being handled electronically. Even without a deliberate go-slow – and many in the industry believe that it was deliberate – it was inevitable that processing would be protracted. Meanwhile, 2009 saw some of the dubious colleges collapse, leaving thousands of international students in limbo. At the same time, reports of violence against Indian students began to make headlines worldwide. Some of the failed colleges were members of the Australian Council for Private Education and Training, the national industry association that provides tuition guarantees for students enrolled with its members. Acting CEO Claire Field says:  “In retrospect we were a little naive. We thought that if the state and federal governments had licensed a college to operate, that was enough for it to be a member of our council.” Left to pick up the pieces for thousands of students, the council introduced more stringent requirements for membership, and its own vetting procedure. “The governments let us down,” Field says.

In late 2009 there were more changes. Evans announced that applicants for student visas would have to demonstrate they had at least $18,000 in their bank accounts to fund their living costs – up from $12,000, and much more than the amount required by Australia’s competitors in the marketplace. Then, in February this year, the government announced the hardest hit of all: the revocation of the MODL, which by now contained 106 occupations, including many that were no longer in demand.

Announcing the end of MODL, and with it the hopes of many students, Evans said: “A student visa is just that: a visa to study. It does not give someone an automatic entitlement to permanent residence. International students should be focused on obtaining a good qualification from a quality education provider in a field in which they want to work. Similarly, Australia’s migration program is not and should not be determined by the courses studied by international students.” This was in complete contradiction to most of the previous 15 years of policy settings.

Attention now focused on another list – the Skilled Occupations List (SOL), which contained professional and managerial occupations. Evans announced that a new and more targeted version would shortly be released. All over Asia, students considering their options were waiting for the list. It was meant to be announced in April this year, but was delayed until May. This uncertainty alone probably cost Australia thousands of students. When it was released, it included just 181 managerial, professional and trade occupations, down from 400.

The findings of the Baird review had been reported in March. The linking of migration outcomes to education had skewed the whole sector, Baird said. The government’s recent changes had gone a long way to correct this. He recommended comprehensive improvement in regulation of the sector – higher entry requirements for colleges, and more care and information for students. The changes were supported by almost everyone, and acted on swiftly by governments. But, as Fields says, it was too late to avoid the damage to Australia’s reputation.

Today, there are no touts at the city’s railway stations, and no migration agents’ flyers at TAFEs and universities. Life is harder now for the dodgy operators. But the number and rapidity of changes in policy have made Australia look like a risky option for any international student with their eye on migration. Many are being deterred by the uncertainty, the $18,000 requirement and the achingly slow processing of applications.

All these things needed attention just as Canberra entered its long agony of election followed by hung parliament. Is it now too late? Marginson has advised universities to accept that the boom days will not return. Meanwhile, there should be “less ‘Brand Australia’, more individual marketing”, with research universities going for quality, and the sector as a whole lifting pastoral services.

Government, he says, should invest in subsidised housing on or near campuses. International students should be allowed the same concessions on transport as those given to domestic students. There should be institutional guarantees of student rights. People, Marginson says, are not commodities. By defining them only as consumers, governments and institutions have managed to ignore the need to safeguard their human rights and guarantee their security.

The commoditisation of international students has hurt Australia. The clean up may hurt us more.

Many don’t believe the link between migration and education has really been broken, either. The next scam, say those in the know, is likely to be unscrupulous employers offering deals to students desperate to be prioritised as “employer sponsored”. Probably, as a parliamentary library briefing paper on overseas students, published in June 2010, puts it, the link between education and migration can no longer be severed without devastating consequences. “Rather, attempts to decouple the two programs need to be carefully managed.” So far, such care has been in short supply.

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