In the context of a $A1.7 trillion economy, a potential ‘cost’ of $A800 million is not something which provides huge downside risks for Australia’s economic growth.
Looking forward, there is still plenty of potential for Australia’s education and tourism sectors.
The enormous growth globally of Chinese travellers and students going abroad over last 20 years reflects the rapid expansion of the middle class. The middle class in China is estimated to increase by another 370 million people by 2030.
Although the increase in middle class individuals will allow strong growth in Chinese tourists to Australia to return, ANZ Research does not see quite as much scope for growth in education.
As China continues to develop its universities will also increase in quality and reputation. Once this happens fewer students will choose to travel overseas as they can get the same quality level of education domestically.
The growth in students from the US coming to Australia to study has averaged around 1.3 per cent a year from 2002. Eventually as Chinese universities reach a similar - if not higher – quality, growth will likely be similar.
But there are other markets that will become increasingly important for Australia. This is where the future of the sector is bright.
Hayden Dimes & Bansi Madhavani are Economists and David Plank is Head of Australian Economics at ANZ