Melbourne’s top universities bottom of the class as financial strife deepens

The University of Melbourne, RMIT and Swinburne University are among the higher education institutions facing deepening financial strife under the federal government’s “command and control” approach to the sector.

A new report by financial consultancy KordaMentha says 30 of the country’s 37 public universities have combined debts of more than $10 billion – up by 44 per cent over six years – and that last year’s reforms, the most sweeping in three decades, would make it more difficult for them to pay what they owe.

The University of Melbourne had a financial surplus last year of nearly $273 million on revenue of more than $3.7 billion, but researchers placed the prestigious institution at the bottom of its rating of 30 universities for short-term financial health, comparing current assets and liabilities.

Two other local institutions, RMIT and Swinburne, came second-last and fourth-last on the same “current ratio” in the report, published on Thursday morning.

Melbourne University’s chief operating officer Katerina Kapobassis said that “the university maintains a strong financial position reflected in our net assets”.

“Comparing current ratios does not reflect the relative strength of each university’s balance sheet as they account for cash and investments differently,” Kapobassis said.

“The university continues to balance careful financial stewardship with the need to invest in our student and staff experience.”

Swinburne cautioned against placing too much emphasis on the current ratio, arguing the calculation showed the university was making good use of its working capital.

“The KordaMentha report confirms what our 2024 annual report shows – Swinburne is in a strong financial position thanks to prudent financial management and investing in the things that matter,” a spokesperson said.

RMIT said it too was on a sound financial footing.

“As reflected in our 2024 annual report, RMIT recorded an operating surplus and is financially sustainable,” a spokesperson said.

“We continue to invest in staff and the student experience and in our substantial operations in Southeast Asia.”

The KordaMentha report says universities – which face costs rising 8 per cent annually, nearly four times the current rate of inflation – need to urgently take a hard look at costs and debt levels to ensure their long-term financial sustainability.

The firm’s research team, led by former La Trobe vice chancellor John Dewar, identified Labor’s reforms of 2023 and 2024 as the most profound changes to the tertiary sector since the early 1990s, as the federal government capped international student numbers and created the Australian Tertiary Education Commission (ATEC).

The commission’s commitment to “managed growth” for the sector amounted to a “command and control” approach, according to Dewar’s team, which was likely to increase the financial squeeze on universities which had still not recovered from the shock of the COVID pandemic.

“‘Managed growth’ will see a degree of central control over the size and shape of university provision not seen for many years,” the report’s authors wrote.

“The combined impact of enrolment caps and centralised planning is significant.

“Universities will face tighter government control over the numbers of domestic and international students as well as the possibility of adjusting the disciplines of study offered – limiting future revenue growth.”

Despite most universities growing their revenues last year, KordaMentha researchers say that weak demand from onshore students and caps on lucrative overseas enrolments will combine to limit growth in 2026 and beyond, forcing institutions to consider slashing expensive research programs, offering fewer courses, or finding savings elsewhere.

But the report also predicted the financial pain would not be felt equally across the sector, with the authors identifying winners and losers from Labor’s evolving policies on international student numbers as well as a “golden ticket” group of universities, set to benefit from the latest changes, which includes Swinburne and another local operation, Victoria University.

The mixed picture is underscored by the glowing report card on the University of Melbourne’s finances issued by international ratings outfit S&P Global in September, while downgrading its credit rating for another Victorian uni, La Trobe.

S&P said the University of Melbourne’s “excellent market position, sound operating performance, abundant financial resources, and manageable debt levels” all pointed to a stable financial position for the university in the coming years, despite the possible effects of the caps on offshore enrolments.

The University of Melbourne and federal Education Minister Jason Clare have been contacted for comment.

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