While redundancies and casualisation have aggrieved staff, Australian universities¡¯ hard-headed pandemic response has reassured the bean counters.

A report from credit rating agency S&P?Global says measures to reduce staff costs ¨C along with pragmatic decisions about campuses, courses and contingency funds ¨C have contributed to the sector¡¯s ¡°solid¡± financial position.

¡°The crisis has shown universities have substantial flexibility to respond to ups and downs,¡± the report says. ¡°The forceful response by university managers to the crisis has helped to protect their balance sheets, for?now.

¡°Universities have been slashing headcount, renegotiating employment contracts, freezing new capital investment, closing unviable campuses or courses, tapping reserves or contingency funds, selling assets, and ¨C in some cases ¨C raising new debt.¡±

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The staffing reductions will help universities weather more years of Covid-induced financial difficulties, the report says. ¡°Rolling layoffs through 2021 will prolong the sense of emergency but help support long-term financial viability.

¡°An increasingly casualised workforce also makes retrenchment easier,¡± it adds, noting that casual employees shoulder about one-quarter of the academic workload and account for ¡°probably a?majority¡± of employees on a headcount basis.

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While universities are estimated to have forgone A$1.8?billion (?1?billion) of?revenue last year, the report says, this is less than half the A$4.5?billion it?outlays annually in capital works or the A$4.7?billion ¡°pile of?cash¡± the sector was sitting on at the beginning of?2020.

It says that on one ¡°simple measure¡± ¨C the ratio of cash and financial investments to outstanding debt ¨C 24 of Australia¡¯s 38 publicly funded universities meet or exceed a ¡°particularly sturdy¡± 3:1?benchmark.

They include three of the four institutions rated by S&P?Global: the Australian National University (ANU), UNSW Sydney and the universities of Melbourne and Wollongong. The report says all four institutions ¡°appear relatively robust¡±, although two have ¡°negative outlooks¡±.

The agency last year downgraded the credit rating outlooks at Wollongong and UNSW from stable to negative, while maintaining current ratings of?AA at?Wollongong and AA+ at?UNSW. Since then, the report says, new debts raised by several universities will ¡°erode rating headroom¡±.

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They include A$350?million at Wollongong for a student accommodation project, a planned A$243?million at ANU to fund new capital investments and staff redundancies, and A$250?million at?UNSW to ¡°shore up its liquidity¡±.

The report says some Queensland and Western Australian institutions also drew on loan facilities from their state government treasury corporations, while Australia¡¯s three northernmost universities ¨C Charles Darwin, James Cook and Central Queensland ¨C entered into new loan agreements backed by a commonwealth infrastructure agency.

While the four S&P-rated universities are yet to publish their formal accounts, they have released indicative results showing that three registered deficits last year ¨C ANU (A$18?million), UNSW (A$19?million) and Wollongong (A$40?million). Melbourne flagged a A$180?million surplus but said only about A$8?million of this was available for general purposes.

The report says university leaders face a ¡°delicate¡± task convincing staff to accept ¡°further parsimony¡± next year, to ¡°defend against another year of revenue squeeze¡±, while fending off politicians¡¯ claims that ¡°the?sector does not need aid and has overestimated its potential losses¡±.

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It says amalgamations between universities are ¡°possible, though they are rare. Another option is for universities to partner with the private sector in mixed-use development of campuses.¡±

john.ross@timeshighereducation.com