International students play a significant role in the Australian economy. They contribute to demand through their spending on goods and services and are an important source of labour for some Australian businesses. This article shows that international students tend to add more to demand in the economy than they do to supply in the short run, in large part reflecting their spending on tertiary education fees. Throughout the article, the analysis primarily considers how international students interact with and contribute to the economy from a shorter run perspective.

The article begins by stepping through developments in international student flows since the start of the COVID-19 pandemic in 2020. It then examines the ways in which international students interact with and contribute to the Australian economy, first by taking an economy-wide view of how international students contribute to supply and demand, and then considering their specific interactions with the market for goods and services, the labour market and the housing market. Finally, it concludes by assessing whether large changes in international student numbers have affected macroeconomic outcomes in recent years. 

In periods of large swings in international student numbers or when the economy has little spare capacity, changing international student numbers can affect macroeconomic outcomes, particularly in sectors of the economy where supply cannot respond quickly. The rapid growth in international student numbers post-pandemic likely contributed to high inflation over this period, but was not a major driver.