Credit rating agency S&P Global has put Australia’s top university on notice, saying rising staff costs and federal international education policies are “squeezing operating margins”.
The agency has changed its long-term rating outlook for the University of Melbourne from stable to negative, indicating that the institution risks being downgraded over the next year or two.
For now, S&P has maintained Melbourne’s long-term and short-term ratings at AA+ and A-1+ – respectively the second highest and highest markers of creditworthiness – while expressing doubts that the university can maintain its financial performance at that level.
“We could lower our ratings…if management is unable to control its expenses and narrow its operating deficits,” the agency cautioned. “The negative outlook reflects our view that the…operating margins may underperform our expectations.”
The warning underlines the pressure on Australia’s higher education sector, given that Melbourne is one of its most successful players. S&P’s assessment highlights the university’s “very strong financial profile” and “ample financial resources” to handle any downturn in its fortunes.
