Australia — Services exports recover strongly even as headwinds mount

Services exports hit a record $118 billion over the year to March 2024 (around 4.5% of GDP and 18% of total exports), well above $95 billion in the full year to March 2019 (Chart). Short-term visitor arrivals totalled 2.8 million through the first fourth months of 2024, a 30% increase from the same period a year earlier. The competitive Australian dollar, ongoing strong demand from Asian markets, reopening of flight routes, and restart of group tour travel from China to Australia, which occurred in late 2023, should see tourism-related services (excluding education) approach pre-pandemic levels within the next year. Indeed, more than 337,000 Chinese visitors travelled to Australia from January-April 2024, three times as many as in January-April 2023, albeit still lower than pre-pandemic averages of about 550,000 in the same period through 2017 to 2019.

Education-related services, which are over 40% of total services exports, hit a record $49 billion over the year to March 2024 amid record international student enrolments of 971,000 in 2023. International demand for Australian education is higher through early 2024; in the first four months of 2024, nearly 215,000 students arrived in Australia, up 35% from the January-April 2023 period. Moreover, international student enrolments totalled about 741,000 through the first three months of 2024, up from 609,000 in the same period in 2023. However, growth in international student enrolments is likely to slow through the rest of the year on the back of tighter visa rules. The 2024-25 budget projects net overseas migration to decline from 528,000 in 2022-23 to 395,000 in 2023-24 and 260,000 in 2024-25. The government is proposing caps on institutions, locations or courses to limit international student numbers. Moreover, the maximum eligible age for international students to get a temporary graduate work visa will be reduced from 50 to 35 years.