As the Chinese New Year holiday, or Spring Festival — which effectively runs for about 10 days — moves into top gear after the weekend celebrations ushering in the Year of the Rooster, China continues to disgorge millions of tourists into all corners of the globe, and Australia is set to be a prime beneficiary.

For the past decade, China has been the fastest growing place of origin for tourists to Australia — much like Japan during the 1970s and 1980s — and the Chinese are now the biggest source of tourist dollars to Australia and supply the second largest number of visitors after New Zealand. In the 12 months to November 2016, almost 1.2 million Chinese came to Australia as tourists, up 19% from the previous 12 months.

Australia’s other big “services” export to China is education. Australia has been a pioneer globally in attracting students from offshore to come and study at our universities, vocational colleges and, more recently, high school. The “industry”, including the support sectors that benefit from the international student dollar, was estimated at being worth $19 billion in 2015/2016, making it the country’s second largest export after resources and third largest single export after iron ore and coal.

Still, it’s a distant third with iron ore exports worth $50 billion a year and coal worth $30 billion.

“Services” exports has become the central buzzword for the Turnbull government’s Trade, Investment and Tourism Minister Steve Ciobo who recently demonstrated just how out of touch he can be when he defended former health minister Sussan Ley only days before she resigned. As part of his defence he stated that taxpayers expected ministers to attend sporting events (at their expense).

Ahem, Steve, these days, when an outing to the footy (of any code) could cost a family of four a few hundred bucks, no they don’t. The comment added fuel to the perception in plenty of quarters that he is something of a lightweight on the frontbench.

So when the government blathers on about services, it’s really talking in dollar terms about education and tourism. And as is typical of Australian governments (see resources, agriculture) the Coalition government, like its Labor predecessors, is keen to keep squeezing the Chinese market, in particular, for more, more, more — especially as the mining boom continues to come off.

Despite something of a dead-cat bounce for our two biggest exports last year, forecasts based on supply-and-demand fundamentals unanimously have prices for iron ore — as well as both coking (steel-making coal) and thermal (power producing and heating) coal — falling back again this year.

The problem is that the international student market — particularly at the most lucrative university end, has already reached peak foreign student levels, according to a number of tertiary sector insiders who spoke to Crikey.

Some universities have upwards of 30% of their students from overseas, and even more hallowed, highly rated institutions like the University of Sydney have 20% of their students form offshore. Of course, much of this trend has been driven by the steady chipping-away of university funding by the federal government set in train by the Howard government.

Chinese students already make up about 25% of international students. There is widespread, documented cheating on English language tests required for entry to most courses, and the high number of students has created a trend of ghettoisation of students — from China, in particular. Also, they are not not getting the English language immersion experience that their parents paid for so, both sides are losing.

A further side-effect is that the trend of investment in apartments by Chinese and other foreign students in the often inner-city districts where universities are located has helped drive up Australian property prices.

The drive by the government for more foreign students has turned, once again, to vocational courses — in particular TAFE colleges where international student percentages are far lower. But this has rekindled the re-emergence of privately run vocational colleges with low entry level commitments; many are questionably run and financed setting up the spectre of a repeat of the disastrous crisis of 2009/2010 where a number of colleges collapsed, exposing networks of institutions plagued by rorts, and which led to a collapse in students from the lucrative Indian market.

This seems most unlikely to change under Ciobo who hails from that mecca of tourism, the Gold Coast. The appointment of a DFAT outsider Stephanie Fahey as the new Austrade CEO, has had a long career almost exclusively in the university sector and more recently educational consulting has also raised concerns that the drive for students may now be super-charged and balanced more towards quantity than quality.

In the tourism sector, Australia’s infrastructure — in terms of hotels, Chinese language skills and Chinese friendly eateries and shops (the Chinese love to shop on their holidays) — is struggling to keep up with the tsunami of Chinese visitors.

As well, one only has to look to places like Hong Kong and Thailand where governments have moved to place limits on the massive Chinese tourist groups that often pay for their entire trips in China. While this is not yet the problem, it is in those places, and it will begin to be as numbers keep mounting, leaving fewer benefits for local hoteliers, restaurateurs, tour companies and merchants. At some point tourism quantity starts to hit quality — all around.

Politically, the focus on Asia — and China, in particular — as central to the strategy of pumping up revenues in both sectors could also create problems, providing fodder for xenophobic political parties, led by One Nation and Pauline Hanson whose famous political pitch was a determination to stop Australia being overrun by Asians. In the age of Donald Trump, this is even easier to leverage.

It’s also an overarching strategy and growth agenda that seems somewhat at odds with Malcolm Turnbull’s stuttering National Science and Innovation Agenda as the fulcrum for sustainable economic restructuring and future growth — a policy that, for now, appears to have stalled as the government searches for easy wins in tourism and education.

It should be careful what it wishes for.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey