Australia’s Secondary Bubble (Private Education Costs)

There are many articles and commentaries in the media describing Australia’s primary bubble, the housing market, but there is not much talk of Australia’s secondary bubble – private education costs.

According to the Australian Bureau of Statistics (ABS), approximately 34% of secondary students go to a private school, this is higher than a number of similar OECD nations including Canada and the UK. Raising children is costly, a private secondary education adds to this cost. Here is a snippet from an article from ‘The Australian’ showing educational costs.

Yearly pay wage growth in Australia is increasing only 1.9% (ABS) and annual private educational costs are increasing at 4% (The Australian) and this trend will cause additional household financial stress.

It has been 26 years since Australia has had a recession, how long can this last?

Scenario:

1. After years of economic growth Australia finally has a recession, deepened by a possible economic downturn in China
2. Being pressed, a number of parents can no longer afford to send their children to private secondary schools and student enrolments goes down
3. As student enrolment in private secondary schools goes down, private education costs per student goes up and private school cost contingencies start to deteriorate; this in turn causes further fee increases and hardships for private secondary schools and families
4. Public schools find it difficult to handle the increased enrolments causing further stress, placements are not immediate
5. House prices valuations near public schools increases, making it difficult to move and buy closer to public schools with better reputations, selling is already more difficult because of the recession
6. The pattern continues for the duration of the recession, some public schools in turn attract more students who may continue to stay on, increasing the competitiveness of some public schools
7. The private secondary education bubble deflates depending on the depth and duration of the recession

References:

1. Australian Bureau of Statistics (ABS) – public school enrolment is on the rise http://www.abs.gov.au
2. The Australian http://www.theaustralian.com.au/national-affairs/education/private-school-fees-spiral-crushing-parents-hopes/news-story/b0b26b43d3520861ff8e0b166b174a61