As the Aussie dollar reaches a 26-year high against Sterling and the US Dollar continues to dwell in the doldrums, the question of the price sensitivity of offshore student recruitment markets looms large.

How much is too much for an Australian education? The answer varies considerably market to market, but while doomsayers wring their hands over the state of our currency, there is a salutory lesson in price sensitivity that can be accomplished by any institution. Has the decline in international enrolments been at the same rate as the decline in offshore currencies relative to Australia's?

For the nation as a whole, the answer is no. The US dollar in particular has declined at a far greater rate compared to the Australian Dollar than the rate of decline in international student enrolments over the past couple of years.

Australian international student enrolments declined 9.1% between May 2010 and May 2011 – due largely to a slump in demand from India from more than 77,000 students to 54,420 students. However, the decline comes on the back of record international student recruitment figures in 2010 and remains well above the number of students the nation attracted in 2009.

In the same period, the US dollar, the key conversion currency which is relevant to families in many of the nation’s core offshore student recruitment markets, has declined by 26% relative to the Australian dollar.

Course prices in real terms are a combination of total fees set by an institution multiplied by relevant local exchange rates and also inflation. When exchange rates become less favourable, real prices rise, presuming inflation and institutional fees remain consistent.

As the chart below shows, there appear to be little correlation between the scale of price shocks inflicted by recent exchange rate variability and our overall international enrolments.

While this chart makes no claims to serious price analysis, it is useful to challenge the common assumption that growth in the value of the Aussie dollar will necessarily drive a decline in demand – which in turn triggers many important questions of both price and value for educational institutions.

Many international university students already feel like they are treated as cash cows as a result of years of ill-informed debate about university funding – focusing on the overall revenue of the sector, commodifying the educational experience and placing degrees in the same purchasing basket as lumps of coal and strands of wool.

How should a university education be valued? If it is valued simply in terms of the costs of employing teaching staff, hiring lecture rooms and providing lab facilities, then an argument could be made that universities could deliver their degrees more cheaply. However, this argument sacrifices reality at the altar of accounting expediency.

University brands are one of the key reasons students choose to study in Australia – ask any international student, parent or agent. University brands are not made of a hired staff member and carefully apportioned room rental costs - they are built from the research and scholarship that occurs across an institution; from the environment which supports students from around the world to learn; and from the effective communication of these differences to key audiences. Students enjoy the knowledge environment that they are immersed in and graduates benefit from the broader university reputation by listing the source of their degree on their CV.

How much, then should an Australian education cost? University fee setting ends up being notoriously arbitrary, predicated on faculty budgets, inflation and some informed market analysis (at best). Where do we end up considering the capacity of future students, their families and/or sponsors to pay?

While many in the education sector would prefer not to dwell on the base financial matters of education, this is a critical question for university administrations - to understand what a higher dollar will mean for access to education and for future enrolment demand.

The fact is, the failure of successive Australian Governments to redress the fiscal woes of many Australian universities has left numerous university budgets in a delicate state. Buildings in decline require serious investment if they are not to detract from the intellect - and in some cases, the potential life expectancy - of the fine minds who dwell within them.

The astonishing surge of the Australian dollar relative to other currencies would have led to an extended round of bloodletting in university international divisions were it not for the Federal Government's timely offer to remove domestic student caps. Universities are mostly turning their gaze much more closely to the Australian market, realising that there is a rare chance to grow, if not prosper - and perhaps renew the wallpaper and tart up the toilets with economies of scale that can be generated along the way.

Australian students hoping to study in 2012 will be the winners, finding many more open doors than in the past - but University CFOs (and the future of several thousand academics whose jobs hinge upon continued international demand) will remain largely in the dark until a greater understanding of educational pricing is developed.