The “operating deficit” is a management choice

As we argued last year, the University’s preferred “operating result” is not the same thing as the audited net result contained in its formal financial statements.

The University itself acknowledges this in the annual report:

“Items that distort core operating performance such as discretionary investment income and income of a capital nature, have been removed from the net (or accounting) result.”  

That distinction matters.

The “operating result” is a management-defined number created by excluding categories of revenue the University chooses not to count when discussing its day-to-day finances. These exclusions include investment income, endowment income and infrastructure-related income.

This approach dates back to changes introduced by University management in 2014, when the University shifted away from relying primarily on audited income statement figures and instead began emphasising an internally defined “underlying operating result.”

As Emeritus Professor James Guthrie from Macquarie University has previously argued, this approach allows universities to present a much weaker picture of their finances than the audited accounts themselves often show.

And importantly, these exclusions are not dictated by accounting standards. They are management decisions.

The University still has enormous wealth

Despite repeated warnings about deficits and financial pressure, the University remains one of the wealthiest public institutions in Australia.

The 2025 report shows:

• Net assets of approximately $8.2 billion  

• Total assets of approximately $12 billion  

• Continuing investment returns, even after a weaker year in global markets  

• Significant ongoing capital and systems investment, including major finance, HR and research management system upgrades  

The University also continues to maintain an enormous investment portfolio while simultaneously arguing that many of these funds are “tied” or unavailable for operational use.  

But this raises the same question we asked last year:

If the University continues generating substantial investment income and accumulating assets, while excluding those resources from discussions about staffing and operations, what exactly is the purpose of that wealth?

A university or an investment fund?

Professor Guthrie previously argued that the University increasingly resembles both a finance business and a property business.

The 2025 report does little to challenge that observation.

The University continues to operate with:

• billions in financial assets,

• large-scale property holdings,

• extensive investment activity,

• and ongoing capital developments and partnerships.

Meanwhile, management communications continue to frame ordinary staffing costs and wages growth as the primary financial problem.

The report itself notes that approximately 59 per cent of expenditure relates to staffing costs, including Enterprise Agreement increases and investment in student support programs.  

In other words, workers’ wages and conditions are increasingly framed as a cost pressure, while investment income and accumulated institutional wealth are treated as somehow separate from the University’s “real” finances.

That is not a neutral accounting truth. It is a political and managerial framing.

“Resilience” for whom?

One of the defining themes of this year’s report is the University’s new strategic plan: Strategy 2030: Resilience.  

Management presents resilience as the institution’s response to a more uncertain environment, including international student caps, geopolitical instability and funding pressures.

The report explicitly links difficult financial decisions to this strategy, including the pausing of the Fishermans Bend campus development and broader efforts to ensure “long-term financial sustainability.”  

But staff should ask an important question:

What does “resilience” actually mean in practice?

Because increasingly, resilience appears to mean:

• holding down staffing costs,

• restructuring workloads,

• limiting hiring,

• centralising services,

• and asking workers to do more with less.

At the same time, the University continues to invest heavily in technology platforms, research commercialisation, global rankings performance and institutional expansion.

The contradiction is difficult to ignore.

Student growth continues. So does workload pressure.

Despite the financial warnings, the University continues to grow.

The report shows:

• more than 76,500 students enrolled in 2025,  

• over 26,000 international EFTSL students,  

• more than 13,000 staff,  

• and operating income rising to $3.3 billion.  

At the same time, staff across the University continue reporting escalating workload pressures, administrative burden and intensification of work.

The University’s own strategy document acknowledges the institution relies on “empowering people and performance” and “improving student experience.”  

But these goals cannot be sustainably achieved through endless efficiency drives while staff numbers and working conditions remain under pressure.

The real issue is priorities

None of this is to suggest universities face no challenges.

International student policy changes, public funding pressures and geopolitical instability all create genuine uncertainty for the sector.

But the University of Melbourne’s annual report again demonstrates that the institution is not poor.

Rather, the real debate is about priorities.

Should the University continue accumulating wealth, expanding investment portfolios and protecting financial reserves while presenting staffing costs as unsustainable?

Or should more of the institution’s enormous resources be directed toward the people who actually deliver its teaching, research and student support?

That is not an accounting question.

It is a political choice.

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Based on the University of Melbourne 2025 Annual Report and the work of Emeritus Professor James Guthrie, Macquarie University.