The Economic Impact of Foreign Fee-Paying Students February 2006 Report to Ministry of Education

1999: $545m 2001: $1250m 2004: $2210m Total Contribution to GDP (including direct, indirect and induced)

Methodology 1. Estimate total expenditure on: Tuition fees (Export Education Levy data) Living Costs (NZUSA survey for public tertiary sector, extrapolation of past/regional relationships for other sectors) 3. Apply economic multipliers to: Gross output Employment Value-Added (contribution to GDP) 2. Calculate economic multipliers (from input-output tables): Type 1 multipliers – direct + indirect upstream Type 1 multipliers – direct + indirect upstream + induced downstream

Methodology Limitations Don’t allow for income leakages from taxes returned as income from welfare benefits etc; Don’t include the effect of new investment which may be needed to expand output and may be financed out of operating surplus; FFPS must pay the same per unit of service delivered than government provides for a domestic student, and that the fee is based on average costs.

Can only address above with a multi-industry General Equilibrium Model: Incorporates all main linkages between agents in the economy – businesses, government, households etc; Does not assume that all factors of production are in excess supply; Allows for price changes (such as if a factor is in limited supply) which may lead producers to change inputs, thereby altering their production structure and hence the associated economic multipliers; Does not force average relationships to hold at the margin; Automatically calculates net multiplier effects by reducing the gross effects to the extent that they pull resources out of other productive uses (that is trade diversion).

Table 1 Expenditure by Foreign Fee-Paying Students

Table 2 Economic Multipliers and Results

Table 2 (continued) Economic Multipliers and Results

Caveats 1.Poor data on spending by other than public tertiary students. 2.Ignore income earned by foreign students from employment. 3.Ignore related tourism – eg family visiting at graduation. Absolute priority - dedicated expenditure survey