Despite a surge in international student arrivals in recent years, the RBA’s latest Bulletin finds their overall impact on rental markets and inflationary pressures has been modest.
The report examines how foreign student numbers shifted during and after the pandemic, noting a sharp decline in 2020–21 when Australia’s borders were closed. This was followed by a swift rebound after reopening in late 2021. By the end of 2023, the international student population had nearly doubled from 2022 levels. This increase made international students a key driver of net overseas migration during that time.
While it’s clear international students significantly contribute to Australia’s economy, the RBA says their effect on rents has been overstated. Although students do increase demand for rental properties, the impact on rent levels has been minimal. According to the RBA’s modelling, an additional 100,000 students would increase rental demand by around 50,000 people, raising rents by approximately 0.5 per cent.
International students are more likely to rent than the broader population, with half living in private rentals. This targeted pressure may amplify rent increases in certain areas, but it does not explain the broader national trend. Moreover, purpose-built student accommodation has responded to this demand.
In terms of inflation, international students brought temporary demand as they settled into life in Australia. Students are required to show proof of nearly $30,000 in savings when applying for visas, leading to an initial spending burst on essentials. However, much of this spending is front-loaded and not sustained over time. Tuition fees, which make up around 40 per cent of international student expenditure, also don’t significantly contribute to broader inflation.
On the labour front, international students have played a growing role in Australia’s workforce since the pandemic. Although they accounted for just 2 to 3 per cent of the labour force before COVID-19, they are now the second-largest group of temporary workers after New Zealand citizens. Their contribution has grown due to relaxed work restrictions. This may ease with recent policy tightening targeting students focused on employment.
To summarise, international students contribute meaningfully to Australia’s economy through education exports, labour participation, and consumer spending. However, the RBA finds they were not a major factor behind the post-pandemic spikes in rent or inflation. Their role, though important, has been one of many influencing forces in a complex economic landscape.
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