Summary

In 1999 the contribution of export education to gross domestic product (GDP) was estimated at $545m. By 2001 this had more than doubled to $1.3 billion.¹ in 2004 the estimated contribution had passed the two billion dollar mark, with the industry's value-added estimated at approximately $2.2 billion.

For these earlier estimates spending by foreign fee-paying students was derived from combining general surveys of tertiary student expenditure (with a small sub-sample of international students), surveys carried out at specific institutions, international visitor surveys and household economic surveys. None were based on a dedicated survey of expenditure by foreign fee-paying students and all excluded the offshore provision of educational goods and services by New Zealand companies and educational institutions. This report addresses both of those deficiencies.

The number of foreign fee-paying students has been on a downward trend since 2003. Nevertheless, over 2007/08 the export education industry generated around $2.3 billion of foreign exchange, of which $70 million came from offshore provision. The industry's contribution to New Zealand's gross domestic product is estimated at approximately $2.1 billion after allowing for flow-on effects to other industries and leakages offshore.

* Economic impact is the contribution to Gross Domestic product. it includes tuition fees, living expenditure by students, offshore education earnings, and flow-on effects through the wider economy.

Most of the revenue from offshore provision comes from the sale of professional services such as teaching, training, curriculum development, quality assurance, consulting and advisory services. China is the main source of these earnings.

China is also the largest country of origin of foreign fee-paying students, accounting for 24,800 out of 91,300 students. South Korea follows with 17,900 students.

By sector, English language schools accounted for the largest group – 33,700, but many of the students are part-time. In terms of full time equivalent (FTE) students universities constitute the largest sector. This also makes university students the largest source of foreign exchange earnings – about 31% of the total.

For the export education industry as a whole (students plus offshore provision), the composition of its total contribution to gross domestic product is shown overleaf.

Figure 1. Total Contributions to GDP by Export Education Sector

Glossary

Throughout this report various measures of the size of the export education industry are used:

Total student spending – all spending by foreign fee-paying students in New Zealand on tuition fees and living costs.

Foreign exchange earnings – the gross amount of foreign exchange earned by the industry, comprising all spending by foreign fee-paying students that is sourced from offshore. Thus it excludes spending that is attributable to the New Zealand earnings of foreign students. It includes earnings from offshore education activities that accrue to New Zealanders or New Zealand entities.

Contribution to gross domestic product (GDP), or value-added – is the net contribution that the export education industry makes to New Zealand's GDP. it is equal to the gross foreign exchange earnings less direct imports (such as imported text books) and less indirect imports (such as the diesel used by transport companies to transport the goods that students buy from supermarkets).

Contribution to GDP is calculated by adding value-added (payments to labour and capital, and indirect taxes) of every industry that directly or indirectly supplies goods and services to export education. This strips out the double counting such as where the cloth used to produce a garment is counted by both the cloth manufacturer and by the garment manufacturer as part of their gross output. More detail is given in appendix B.

Footnote

1. Infometrics (2000) Economic impact analysis of Foreign Fee-Paying Students, report to Education international marketing Network & Asia 2000 foundation. And Infometrics (2002) Economic Impact of International Education, paper prepared for EMIN.