Impact Of Income On Expenditure Among International Students In Australia

Well-being of population measured through consumption and income measures

In an economy, it is expected that the citizens need to be progressing economically and socially with the minimal basket of basic human needs of a nation (Schwartz, 2012). Economic and social progression due to the changes in the basic needs can only be affordable through the level of income. The level of income of an individual or a household ensures the minimum living standards of the society. To assess the well-being of a population, consumption expenditure and income are the two straight-forward monetary measures which are employed. Consumption expenditure is usually preferred to income since it reveals the long-term economic status of a household, especially in low-income countries (D’Acunto, Hoang, Weber, 2015).

It is vital to note that there is a difference between expenditure and income which may make expenditure even a better gauge of well-being for various reasons (Aguiar & Bils, 2015). One of them is that there is a possibility of consumption without expenditure at within the same period (Meyer & Sullivan, 2011). Expenditure is supposed to reflect better on the long-term or permanent income. From this view, it is considered to be a better economic measure of the well-being and the respective inequalities. Developing countries have income estimates of income which are under-reported, vary across seasons and are drawn from multiple sources (Ravallion &Chen, 2011). The process of collecting consumption expenditure that is collected in many developing countries is time-consuming, expensive and needs household size adjustment for composition and price level. Due to these difficulties, the proxies of the economy are collected to measure the household economic status for both small and large scale population-based surveys.

In Australia, nearly half of all international students enrolled feel concerned about their financial situation (Verbik & Lasanowski, 2007). This in contrast to what many believe that foreign international students in Australian universities have an abundance of money to spend. 49.1 percent of international students in Australia feel worried about their finances (Rieckmann, 2012). The figure is slightly lower than the domestic student numbers of 59.5 percent. For an international student to maneuver through this financial conundrum and study, they are forced to limit their spending and lower their living standards (Becker & Kolte, 2012). It should be noted that most of these students rely on their families’ support. Thus, they are forced to cut down on their expenses especially diet, public transport and textbook cost.

International students face a myriad of challenges that are worsened by the fact that they are far from home (Guruz, 2011). Due to these challenges, the following study aims at looking at how the level of income influences their expenditure. Recommendations were made which will opt to give a solution to how the international students in Australia can be aided so as to ensure they pursue they dream through studying.

Challenges faced by international students in Australia

To collect the data, questionnaires were designed. A sample questionnaire can be seen in appendix 1. The survey questionnaire developed consisted of 3 parts with 10 questions. The first part contained categorical variables. The variables included gender, age, education, and country. The second part contained 5 questions which were related to expenditure. The questions that related to expenditure included monthly rent expenditure, monthly entertainment expenditure, monthly transport expenditure, monthly internet expenditure, and monthly meals expenditure. The last part contained 1 question which pertained to the average monthly income.

The questionnaire was admitted to a sample of 20 international students. Ethical consideration was kept in mind as the participants were not forced to answer the questionnaire in order to influence their answers. Moreover, they were assured that the information that they give will be used for educational purposes only. Consequently, the information they gave was treated with the highest confidentiality.

The shortfall of using the survey questionnaires in collecting data is that they are expensive especially in the printing of materials and that they are time-consuming especially during the collection of data. Moreover, the data collection process was limited to a single area.

From the questionnaire, the data set collected entailed 10 variables. The variables are classified as seen in the table below:

Table 1: Category of variables

The data were coded and then collated into an excel workbook. The data was then to be analyzed using the analysis tools add-in from excel. The chosen analysis was descriptive analysis and linear regression. The use of graphical images (graphs and pie-charts) were used in presenting frequencies of categorical variables.  Other descriptive analysis methods that were put into consideration were mean standard deviation and variance. From the results obtained, discussion, conclusion, and recommendation were made.

In figure 1 above, it is evident that most of the survey participants were male with a representation of 55% of the sample. On the other hand, 45% of the participants in the survey were female with a representation of 45% of the sample. 

Consequently, most of the respondents were aged 21 years (30%), closely followed by 19 years (20%). The least was aged 23 years (5%). The results can be seen to be consistent with Woodfield (2010) findings which claim that most of the international students are predominantly aged 20 to 24 years. 

Figure 3 shows that 60% of the respondents were undertaking an undergraduate course while 40% of them were undertaking a postgraduate course.

Data collection process and analysis

Expenses and income descriptive statistics

Table 1: Income and expenditures descriptive statistics

The expenditure that had the highest mean was rent with a mean of AUD 298 and a standard deviation of AUD 146. The least was expenditure was on meals with a mean of AUD 59 and a standard deviation of AUD 27. Total expenditure, the aggregate of rent, entertainment, transport, internet, and meals, had a mean of AUD 582 with a standard deviation of AUD 274. On the other hand, the mean average monthly income was AUD 2,290 with a standard deviation of AUD 1,620.

From the box and whiskers plot in figure 4 above, it is evident that the highest monthly expenditure is spent on rent while the lowest monthly expenditure is spent on entertainment. Box and whiskers plot was used since it can handle large data easily, does not retain exact value, has a clear summary, and displays outliers (Spitzer et al., 2014). Rent has the highest interquartile range compared to entertainment, transport, internet, and meals while entertainment and meals have the lowest interquartile range. Rent also has the highest median expenditure than the other four items. The results, therefore, suggest that the highest expenditure is consistently spent on rent while the lowest expenditure is consistently spent on entertainment. The results are consistent with the finding of Robertson (2014) which ascertains that international students spend most of their income on rent.

The aim of this report was to analyse the impact of income on expenditure. The hypothesis developed to prove this was as shown below:

H0: There is no relationship between average monthly income and monthly average expenditure

H1: There is a relationship between the average monthly income and the average monthly average expenditure

Thus;

H0: b1 = 0

H1: b1 ≠ 0

The following are the regression analysis results that were produced to prove the above hypotheses.

Table 1: Regression Statistics

From table 1 above it can be seen that the adjusted coefficient of determination is 0.548. Thus, it is evident that the variables in the model account for 54.8% of the variability. On the other hand, 45.2% of the variability is explained by other factors which are not in the model.

Table 2: ANOVA

Table 2 shows that the regression model is statistically significant since the p-value is less than the critical 0.05. Thus we choose to reject the null hypothesis and conclude that there is a relationship between average monthly and the average monthly expenditure.

Relationship between income and expenditure among international students

Table 3: Regression Output

From table 3 above, it can be seen that the average monthly expenditure is AUD 289.77 keeping all other factors constant. The constant is also statistically significant since its p-value is less than the critical 0.05 (McKillup, 2011). On the other hand, it was seen that there was a positive relationship between average monthly income and the average monthly expenditure. Thus, a unit increase in the average monthly income leads to a 0.13 unit increase in the average monthly expenditure keeping all other factors constant. The income coefficient is seen to be statistically significant since the p-value is less than the critical value of 0.05.

From the regression analysis, it is evident that there is a positive relationship between average monthly expenditure and average monthly income.  The observation is consistent with the finding of Samargandi, Fidrmuc & Ghosh (2015) finding which pointed out that there is a positive relationship between economic consumption expenditure and economic income. Thus, when an international student tends to have a small income, he or she is forced to minimize his or her spending.  The students will be forced to cut on their spending especially in meals, transport, entertainment, and rent. Entertainment, internet, and meals had the lowest means compared to rent and transport. Therefore, as a way to minimize their expenditure, international students will tend to cut on their meals, transport, and entertainment. Rent and transport still remain the highest expenditure for the international students since they do not have alternatives to pick from. Generally, rent in Australia especially close to towns is expensive (Birdsall-Jones, 2013). Moving further away from town to get affordable rent to imply that the student will have to spend more on transport as they commute to and fro the learning premises.

Conclusion and recommendations

The study has proved that the expenditure of an international student in Australia depends on income. When one has a high monthly income then this translates to a high monthly expenditure. On the other hand, when an international student has a low monthly income, then they are bound to minimize their spending and therefore will have a low monthly expenditure.

Due to the high living standards in Australia, international students have been in most cases required to work while studying while working. A slight request will more often make one eligible to work in Australia. However, this is not enough to ensure that the students enjoy their stay in the campus as they chase their dreams. Thus, international students need to be supported by being given access to full range comprehensive and targeted support services available. Such support can be provided through health, counseling, housing, and other programs. The services will of great benefit to the international students through their facilitation in settling in Australia. Moreover, it will give them an opportunity to be on the right path to success in their studies and also ensuring their well-being and safety.

To improve this study, future researchers should consider having more variables which will supplement the average monthly expenditure. In addition, more international students should be included to have a bigger sample which will be able to be a more representative of the population. 

References

Aguiar, M., & Bils, M. (2015). Has consumption inequality mirrored income inequality?. American Economic Review, 105(9), 2725-56.

Becker, R., & Kolte, P. (2012). International student recruitment: policies and developments in selected countries. The Hague: Nuffic.

Birdsall-Jones, C. (2013). The Bronx in Australia: the metaphoric stigmatization of public housing tenants in Australian towns and cities. Journal of urban history, 39(2), 315-330.

D’Acunto, F., Hoang, D., & Weber, M. (2015). Inflation expectations and consumption expenditure. Chicago Booth Global Markets Working Paper Series.

McKillup, S. (2011). Statistics explained. Cambridge University Press Textbooks.

Meyer, B. D., & Sullivan, J. X. (2011). Further results on measuring the well?being of the poor using income and consumption. Canadian Journal of Economics/Revue canadienne d’économique, 44(1), 52-87.

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Robertson, S. (2014). Time and temporary migration: The case of temporary graduate workers and working holiday makers in Australia. Journal of Ethnic and Migration Studies, 40(12), 1915-1933.

Schwartz, S. H. (2012). An overview of the Schwartz theory of basic values. Online readings in Psychology and Culture, 2(1), 11.

Samargandi, N., Fidrmuc, J., & Ghosh, S. (2015). Is the relationship between financial development and economic growth monotonic? Evidence from a sample of middle-income countries. World Development, 68, 66-81.

Spitzer, M., Wildenhain, J., Rappsilber, J., & Tyers, M. (2014). BoxPlotR: a web tool for generation of box plots. Nature methods, 11(2), 121.

Verbik, L., & Lasanowski, V. (2007). International student mobility: Patterns and trends. World Education News and Reviews, 20(10), 1-16.

Woodfield, S. (2010). Key trends and emerging issues in international student mobility (ISM). Globalization and internationalization in higher education: Theoretical, strategic and management perspectives, 109-123.

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