International students have not driven rents and inflation higher, RBA says

Australia Broadcast Center

24-07-2025

The rapid growth in international student numbers post-pandemic has not been a major driver of higher rents and inflation, the Reserve Bank says.
The RBA's latest quarterly Bulletin was published on Thursday, with a special section on International Students and the Australian Economy.
It looks at the big shifts in foreign student numbers in recent years.
The analysis covers the period when the students left Australia en masse during 2020 and 2021, and then returned after borders reopened in late 2021.
"Rapid growth in the international student stock post-pandemic likely contributed to some of the upward pressure on inflation from 2022 to early 2023, especially as arriving students front-loaded their spending as they set up in Australia and took time to join the labour market," the RBA article says.
"The rise in international student numbers is likely to have accounted for only a small share of the rise in rents since the onset of the pandemic, with much of the rise in advertised rents occurring before borders were reopened."
The RBA's analysis considers how foreign student numbers have affected consumption, inflation, the labour market, and the housing market in recent years, only from a short-run perspective.
"Longer run effects are outside the scope of the work," the article notes.
The RBA says education exports are now Australia's fourth largest category of export, worth approximately $50 billion in 2023-24.
It says in recent years, international students have been an "important driver" of net overseas migration and gross domestic product (GDP) growth.
But it says international students impact Australia's economy in numerous ways, and the dynamics have been unusual in the post-pandemic period.
Firstly, it says global demand for education in Australia had grown solidly in the decade prior to the pandemic.
It says that reflected a range of factors, including rising household disposable income in Asia, the active promotion of Australia as an education destination, and changes to migration policies that enabled higher education students to work in Australia after their studies.
Other factors included global population growth, and the depreciation of the Australian dollar after the mining boom.
But it says with the introduction of border restrictions in March 2020 to contain the spread of the COVID-19 virus, new students were unable to enter Australia.
And as a result, the number of international students fell sharply.
Then, after Australia's international borders reopened in late 2021, the number of international students onshore rose rapidly.
You can see that in the graph above.
But while student arrivals quickly returned to around pre-pandemic levels after borders reopened, the number of students departing Australia were lower than normal because there were fewer students living in Australia to begin with (thanks to the huge number of students that departed Australia during the COVID lockdowns).
The RBA says that unusual dynamic contributed to the total stock of international students living in Australia rising sharply from just under 300,000 in 2022 to 560,000 by the end of 2023.
"Accordingly, international students were an important driver of net overseas migration during that period, accounting for around half of Australia's total net overseas migration," the RBA says.
The RBA says an important area in which international students contribute to demand is in the housing market.
It says foreign students are more likely to rent than Australian residents.
It says about 50 per cent of over 70,000 international students surveyed in the 2023 Student Experience Survey reported that they rent in the private rental market (either in a private rented house, flat or room), whereas about one-third of the rest of Australia's population are renters.
It says in the Student Experience Survey, about 24 per cent of international students reported living with family or friends, 15 per cent in student accommodation, 3 per cent in a homestay, and 2 per cent in "other" accommodation.
It finds housing demand from international students also tends to be geographically concentrated around areas where educational institutions are based, notably inner-city locations.
The RBA says that in theory, when it comes to property prices and rents, in the face of a relatively fixed supply of housing in the short term, we would expect an increase in international students to put upward pressure on rental demand and rents (all else equal), in the same way that any kind of increase in the renting population would impact demand.
But it doesn't think they had a huge impact on rents in Australia in recent years.
"As a back-of-the-envelope exercise, if we assume that 50 per cent of international students rent, an additional 100,000 students would increase private rental demand by 50,000 individuals," it says.
"Models of the housing market used by the RBA suggest that a 50,000 increase in population would raise private rents by around 0.5 per cent compared with a baseline projection.
"The marginal effect of an additional renter may be greater in periods where the rental market is tight and vacancy rates are low, such as occurred post-pandemic.
"Nonetheless, the rise in international student numbers is likely to have accounted for only a small share of the rise in rents since the onset of the pandemic, with much of the rise in advertised rents occurring before borders were reopened," it argues.
The RBA says that with time, higher demand for housing due to a greater number of international students in Australia could spur more dwelling investment, in the way it would for an expansion of the population more broadly.
"One area where higher international student numbers have generated a supply response has been in purpose-built student accommodation, with rapid growth in building approvals for such projects in recent years.
"Industry projections are for continued rapid growth in this area in the years ahead," it says.
The RBA says international students also make an important contribution to the labour market.
"While they only made up around 2 to 3 per cent of the labour force prior to the pandemic, they constitute the second largest group of temporary visa holders with work rights in Australia after New Zealand citizens, making them a large source of potential labour supply for the Australian economy," it says.
It says in the post-pandemic years, the contribution of international students to labour supply has risen, reflecting both a rise in their participation rates and a lift in the limit on how many hours they can work (from 40 hours to 48 hours per fortnight).
But it says that dynamic may drop again, given recent government changes.
"Looking forward, while rules around the number of hours that international students can work are higher than pre-pandemic, average participation may decline from the levels seen in 2024," the RBA says.
"This is because the recent tightening in visa policy has targeted groups of students who were more likely to be seeking to work; that is, those international students who do receive visas going forward are less likely to be focused on employment opportunities in Australia on average."
The RBA says another unique feature of international students relates to the savings they bring with them to set up and finance their life in Australia.
It says currently, international students have to provide proof of nearly $30,000 of savings to receive a student visa, up from about $25,000 in 2023, which is higher than the cash savings most Australian residents have in their bank accounts.
"This could mean there is a temporal dimension in international student consumption, whereby consumption is strong upon arrival in Australia as individuals use these savings to set up their lives (i.e. purchasing furniture and other goods) but then slows afterwards," the RBA says.
"In periods of strong inflows of students, such as just after borders reopened after the pandemic, this likely had an important effect on aggregate demand in the economy," it says.
But it says a large proportion of student spending is on tuition fees, which account for 40 per cent of international student spending.
"Our estimates of the average weekly spend of international students using Balance of Payments data suggest that international students spend twice as much as residents," the RBA says.
[But] excluding fees, international students spend roughly the same as residents on average.
"There are, however, some slight sectoral differences. Accommodation and food, transport, and housing make up a slightly higher share of the gross value added associated with education export spending, while business services, and retail and wholesale trade, make up a lower share," it says.
And overall, the RBA says the rapid growth in the number of international students post-pandemic likely contributed to some of the upward pressure on inflation from 2022 to early 2023, but it wasn't a major driver.
"The increase in international students was just one of many other forces at play in this time that drove demand above supply in the economy, and hence higher inflation," the RBA concluded.