It was a "heinous crime on humanity", according to S.M. Krishna, the Indian foreign minister.

The killing of Nitin Garg, a 21-year-old Indian graduate stabbed while on his way to work at a restaurant in a Melbourne suburb in January, made headlines around the world and sent shockwaves through the Asia-Pacific higher education community and beyond.

The murder was one of a spate of attacks in recent years on Indian students in Melbourne and Sydney. The incidents had already prompted accusations of hate crimes and racism and led to street protests and riots.

In the regions that provide many of the students for Australian universities, the reaction was outrage. The Malaysian Sun asserted that the Australian government was "unable to stop crime against Indians". The Gulf News of Dubai said that "hatred" was the "common trend" in Australia. Delhi's Mail Today newspaper went as far as to depict an Australian policeman in a Ku Klux Klan hood while condemning the laggardly pace of the investigation. One reader of the Times of India advised that "Indian students should stop going to Australia".

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"The death of Nitin Garg intensified the criticism of Australia's handling of international student safety," says Simon Marginson, professor of higher education at the University of Melbourne. "It gave credence to the main charges - that Australia was unable or unwilling to stop the pattern of targeted attacks, a pattern that was more than three years old, and that Australia was too slow to respond."

However, Marginson continues, the allegations of institutional racism made in the wake of Garg's death are not justified. "The reason why Australia had not addressed the pattern of assaults more effectively is not racism but the commercial imperative.

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"Political leaders are reluctant to say or do anything that would impair the advertising hype promoting Australia as the safest country in which to study," he says. "The authorities made the crucial error of elevating the economic interests of the export industry above a human concern for the students. This fed into perceptions that Australia's approach to education is overly businesslike."

Those perceptions certainly have some basis, for international student recruitment in Australia is very big business.

The extraordinary size of the overseas student market in Australia was highlighted in a government-commissioned review of Australian higher education chaired by Denise Bradley, former vice-chancellor of the University of South Australia.

In the review's final report, which was published in December 2008, Bradley says Australia "has been extremely successful in developing education as an important export industry". That looks to be an understatement when one examines the figures.

Of all the countries of the Organisation for Economic Cooperation and Development, Australia has the highest proportion of international students. In 2007-08, Australia's higher education services exports were valued at A$14.2 billion (?8.57 billion), with student numbers having expanded at an average rate of 14 per cent a year since 1982. The sector grew again the following year to reach A$16.8 billion in 2009. Education services have displaced leisure travel services as Australia's largest service export and are now the third-largest export overall, behind only coal and iron ore.

Worldwide, the number of international students tripled between 1985 and 2006. Australia, however, experienced a twelvefold expansion - from 21,000 students in 1989 to 250,000 in 2007.

This extraordinary success has not come without headaches.

In her report, Bradley notes the "possible overdependence of some providers on overseas students, which leaves them vulnerable to political and economic upheavals in the markets on which they depend".

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This presciently highlighted how exposed Australia could be if it were beset by a crisis, which is exactly what the student safety controversy delivered.

More than half of Australia's overseas higher education cohort comes from just four countries - China, India, South Korea and Malaysia. And although only 15 per cent of the higher education sector's total revenue in 2007 was derived from overseas tuition fees, some institutions are overly reliant on them.

Two providers received more than 30 per cent of their income from overseas tuition fees in 2007 - the University of Ballarat, where they accounted for 31 per cent of income, and Central Queensland University, where they made up 44 per cent of revenue. Not far behind those two were Macquarie University, with 28 per cent, and the Royal Melbourne Institute of Technology at 26 per cent.

"It appears," Bradley says, "that many institutions use international student revenue to support services to domestic students and bolster research infrastructure there appears to be a systematic pattern across institutions of cross-subsidisation."

As that comment hints, the reason some institutions are so keen to capture overseas students is not to gild their profit margins but to help keep them afloat.

According to Ian Chubb, vice-chancellor of the Australian National University (ANU), the universities of Australia are underfunded. Spending on tertiary education from all sources is above the OECD average (and higher than that of the UK), at 1.6 per cent of gross domestic product. However, Chubb points out in an email to ³ÉÈËVRÊÓƵ: "Australia was the only OECD country where the public contribution to higher education remained at the same level in 2005 as it had been in 1995," while student numbers grew by more than a third.

"Where Australia has used increased private expenditure to substitute for the government contribution, other countries used private expenditure as a supplement to continued growth in government support."

He says that even support for ANU - the country's "best resourced institution in per capita terms" and Australia's top institution in the ³ÉÈËVRÊÓƵ World University Rankings - falls well short of funding levels for other elite international universities.

Graeme Turner, director of the Centre for Critical and Cultural Studies at the University of Queensland, has spent the past four months on research secondment at the University of Pennsylvania in the US, where he is still based. It is clear to him that core funding for Australia's universities is insufficient.

"If you were to compare the leading Australian universities with the leading American universities, the funding disparities are massive. The past decade or two have seen a steady decline in the levels of base funding provided by the government to the sector.

"The current government has been more positive in its intentions for the sector than its predecessor was, and the current minister for education has restored some funding, but promises to do more were frustrated by the global financial crisis."

For Turner, the real problem for the sector is short-termism. "Successive governments have taken the road of channelling any new money into targeted or strategic development rather than into operating grants or infrastructure budgets. This tactic is progressively skewing both the performance and the long-term capacity of the sector towards short-term political goals. The urgent need is for a higher level of operating funding, and that seems a long way away at the moment."

Given universities' need for cash, it is no surprise that they have explored alternative sources of funding and pursued international students.

Steven Schwartz, vice-chancellor of Macquarie, has spelled out just how dependent Australian higher education institutions are on overseas students.

In "Big ideas for Australian universities", a paper published last year in the OECD's ³ÉÈËVRÊÓƵ Management and Policy journal, he writes: "For most of the preceding 12 years, per-student funding for Australian universities failed to keep up with inflation. Even when student tuition fees (through the ³ÉÈËVRÊÓƵ Contribution Scheme, or HECS) are added to public funding, the cost of teaching is still not fully covered.

"Because universities have not been able to make ends meet by relying solely on government funding and the fees paid by domestic students, they have enrolled large numbers of international students whose high fees make them more lucrative than domestic students."

But, he adds: "In their attempt to make up for funding shortfalls, it is possible that some universities have been forced to sacrifice quality for quantity."

Schwartz does not see much prospect of improvement on the horizon. The Bradley review suggested there should be a modest increase in government funding to support a major drive to raise the higher education participation rate to 40 per cent (from the current 32 per cent) of 25- to 34-year-olds by 2025 and to lift the proportion of people from lower socio-economic groups at university to 20 per cent (from 16 per cent). Crucially for Schwartz, however, the review ruled out an increase in student tuition fees.

"Forbidding fee increases is really a way to protect those universities that will find it difficult to get students to pay higher prices for the education they offer," Schwartz complains. "Capping fees means that the only way for universities to increase revenue is to enrol more students for which they will receive the same inadequate support they receive for currently enrolled students."

But Peter Coaldrake, vice-chancellor of Queensland University of Technology and chair of Universities Australia, is less gloomy.

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"Following the Bradley review, additional capital funding has been provided, and additional recurrent funding is earmarked to flow fully from 2013," he says.

"The pressure on operating funding noted by Bradley would be met by lowering the rate at which real funding erodes - by improving indexation, which will, however, remain below cost growth - as well as providing some performance-based funding.

"A 10 per cent lift in funding recommended by Bradley for operational needs has not been provided in full, only the component - about half - that was earmarked for widening access. The government's response to Bradley also included a review of base funding levels to be completed next year, although no budget provision has been made for any increase."

As Coaldrake sees it, the financial situation is not as dire as some portray it, but all the same "overseas students will remain a significant part of the overall higher education economy for Australia".

There may be no escaping the reliance on overseas student income, but there is also no escaping the fact that that particular reservoir is not bottomless. Noting its vulnerability, the Bradley report goes on to issue a clear warning: "While Australia has been very successful in attracting international students, there is some concern about the viability and sustainability of this growth."

A forecast made by IPD Education in 2007, before the global financial meltdown, predicted that international demand for places at Australian universities would stop growing this year and then slow to 3 per cent a year by 2015 before declining even further.

Following the same line, the Bradley report warned: "Indications that the growth of the market is slowing suggest that domestic and global competition will intensify. As well, Asian countries from which Australia has traditionally recruited students are developing their local higher education capacity to meet domestic demand and are becoming players in the international student market."

The situation is certainly not helped by the perception that Australia is no longer the safe haven for students it used to be.

Marginson sees no need for panic. "The international education industry in Australia is primarily supply driven, not demand driven, which is why it has continued to grow both during the Asian financial crisis of 1997-98 and the current global financial crisis," he says.

"In the great majority of universities, numbers are determined by visa policy and the willingness of universities to accept the students. This allows universities to pump up numbers from other countries should there be a drop in the quantity or quality of students from India."

The overseas student security crisis, Marginson says, highlights the need for the whole anglophone higher education world to radically rethink how it treats the students it attracts from abroad. "It suggests the need to acknowledge student security in comprehensive fashion, rather than focusing primarily on consumer protection as Australia, with its excessively commercial approach, has done."

In May, Marginson, with colleagues from Monash University and Central Queensland, will publish International Student Security. The book details the results of research funded by a discovery grant from the Australian Research Council - the fruits of 240 interviews at 11 universities, with students from 35 countries, as well as a literature review of research on student safety.

The work defines student security to include issues ranging from financial support, housing, health and immigration considerations to less immediately recognisable factors such as personal networks, loneliness and intercultural issues. It identifies 25 areas in which international students are excluded from local student entitlements, such as transport concessions, free medical care and some student loans and scholarships.

The researchers conclude that the "ultimate problem" is a regulatory framework in which international students are treated as consumers, and accorded some consumer rights, rather than as people deserving the full complement of human rights.

"Arguably," Marginson says, "Australia would position itself more effectively as an international provider if it took two moves that would signify an advanced approach.

"The first is to explicitly acknowledge that international students have the full array of human rights. The second is to install into policy and regulation in all areas the principle that as temporary migrants, international students should be treated exactly the same as local students unless there are compelling reasons to do otherwise."

If the regulatory and policy regime treats students as outsiders, he says, "it is perhaps unsurprising that some sectors of Australian society also treat them as outsiders".

GOVERNMENT REASSURANCES ON SAFETY: A blanket promise of security

The Australian government has acted to ensure that international students feel safe and supported when they come to Australia. A statement by the Department of Education, Employment and Workplace Relations outlines its efforts:

The Australian Government welcomes international students and will not tolerate discrimination or victimisation of any students. Governments at all levels in Australia are working together on the safety of international students.

On 2 July 2009, the Council of Australian Governments committed to the development of an International Student Strategy for Australia to be implemented in the 2010 academic year, a major focus of which was international student welfare including safety.

In September 2009, deputy prime minister and minister for education Julia Gillard held a roundtable for international students to discuss issues affecting their study experience such as accommodation, welfare and safety. The resulting communique contained a set of recommendations to enhance the quality of the education and life experience in Australia and was presented to the Ministerial Council on Tertiary Education and Employment on 28 September 2009. A number of measures were immediately agreed, including the development of a new online manual for international students, as well as work to establish a new representative body for all international students.

The government is well advanced in developing strategies to improve the experience of international students, including the provision of better information on personal safety and security to students and supporting education providers to develop good practice in campus safety.

Safety is primarily a police matter, and actions have been focused in Victoria and New South Wales. Strengthened and higher-visibility police operations have been undertaken, including a crackdown on crime around metropolitan transit hubs and heightened community engagement by police.

These measures have made progress in bringing perpetrators of attacks to justice. More than 100 arrests have been made, and these will continue as police investigations progress.

Entitlements

The government appointed the Hon Bruce Baird to conduct a review of the Education Services for Overseas Students regulatory framework. Mr Baird has completed his review and presented his final report to the government with recommendations and findings to strengthen the legislation, to better protect international students and to ensure that Australia continues to offer world-class quality international education.

The report, Stronger, Simpler, Smarter ESOS: Supporting International Students, was released on 9 March 2010. The government has agreed to begin work on implementing a number of the recommendations immediately.

All international students have access to Overseas Students Health Cover, which is designed to give them a similar level of cover as provided by Medicare.

The government is working to provide consistency in the transport concessions available to international students across states and territories.

For more information:

International Student Roundtable Communique:

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Baird review into International Students: