University of Newcastle forecasts $23 million deficit for 2022

But he said UON will have to exercise "restraint" and become more "efficient and effective" as it moves into a "challenging 2023".

Professor Zelinsky wrote to staff on Tuesday afternoon advising them of the anticipated deficit, which he attributed to a number of factors, including operating costs exceeding revenue due to a decline in student load revenue; 'on paper' investment losses due to recent volatility in the global stockmarket and costs associated with the now-closed STEMM project.

UON last recorded a deficit in 2008. It was $1.4 million.

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"What [the deficit] is showing is that it's tough," Professor Zelinsky told the Newcastle Herald.

"If we continue to move in that direction it would obviously be concerning.

"Overall the university has got cash in the bank to pay its bills but what I wouldn't want to do is have to sell our investments to pay the bills, because if you sell the investments then you realise those losses.

"What we need to do is keep going and do well in these difficult times.

"It's more about uncertain times, that's the problem we've got, and I believe the uncertainty, inflation, all these things, wage pay rises, there's many variables here and also the Higher School Certificate - how many students will join us next year - there's a lot of uncertainty and while things are uncertain we've got to be very careful and conservative."

National Tertiary Education Union Newcastle branch president Associate Professor Terry Summers said he wouldn't argue with UON's numbers, because he didn't have access to them.

"The university has made continuing surpluses for more than a decade, we've got one of the strongest financial positions in the university sector in the country, we've got by far the lowest debt ratio in the country and the university seems to be well placed going forward," Dr Summers said.

"This is a relatively small deficit compared to the surplus made last year of $185 million."

Professor Zelinsky said UON faced "volatility" in its student numbers both this year and next year, which had impacted its revenue.

On one hand, the number of offers for international students for semester and trimester one next year are more than 20 per cent higher than at the same time in 2019, with strong growth from countries including India, Nepal, China, Vietnam and Pakistan.

"While we're seeing strong numbers for this year, the shortfall created by fewer international students arriving over the past three years will continue to impact revenue for the coming years," he said.

On the other, there has been a decline in domestic student enrolments.

"Last year we under enrolled by nearly 1000 students [to start this year] and we really don't want to have that become a year on year trend," he said.

"We get paid for the number of students who attend university by the federal government, it's not like you get a certain amount of money irrespective of how many students.

"We've been more or less balancing our demand, when our international students went down we took on some more domestic students, particularly in the postgraduate area, people were studying from home for a year or two.

"Now what's happening is unemployment has now gone right down, people are working again, so the demand for postgraduate or mature age studies has gone down... so we need to think about how to offer part time studies, et cetera."

He said across the state there had been a drop in demand to study at university next year.

"We're seeing the fallout of kids being affected [by COVID] in high school in years 10 and 11 not coming back to school, or attempting the HSC and not being very pleased with how they're feeling about their potential to go onto further study, to TAFE or university.

"There's a real problem for Australia and for society if we lose this generation... I think no-one expected that and we just thought 'Kids are back to school, things are back to normal' and now we're seeing this very serious issue."

He said there had been a decline in the number of school leavers and non school leavers listing UON as their first preference for study next year.

"At this stage we are seeing a decline in first preferences for school leavers of about 10 per cent compared to this time last year," he said.

"That doesn't mean we'll see 10 per cent less students, what it is is an indicator we're going to probably have to work very hard to fill our load.

"It really becomes a little bit of a battle for hearts and minds. You've got to get out there and talk about the university, contact the students, engage with them.

"There's a place at our university for everyone... whether that's in a degree or in a free enabling program to help them prepare and move into a degree."

UON came under fire for its $185 million surplus for 2021, when it was cutting staff and its number of courses.

At the time Professor Zelinsky said there were a "number of one off results" and pointed to a smaller underlying surplus of $6 million.

He said he disagreed with criticism that questioned the value of cutting staff and courses considering it didn't help avoid a deficit.

"I would reject that line of argument," he said.

"We had very minimal staff reductions compared to other universities, I think we had an overall reduction of 120 positions or thereabouts, others had hundreds and hundreds of jobs go.

"My view is we tried to adjust. Did we know COVID would last one year, two years, three years? No-one knew that."

Professor Zelinsky said the cuts had prevented further challenges then - and now.

"We did a lot of tough measures during COVID and that's basically given us the flexibility to hang in there," he said.

"I'm not proposing any staff reductions in 2023 at all at this stage.

"It all depends on where we also end up with enterprise bargaining.

"We will be putting an agreement to staff which we think is affordable.

"If it gets rejected and we have to go back to the drawing board and offer more, then we have to find ways to pay for that, but at this stage in 2023 we will not see any impact on staffing levels and so that's important to know.

"We can see our way through next year."

However, he said, UON would have to keep an eye on its costs.

"The enterprise bargaining agreements we have in place ensure we have certain workplace productivity through our workload models and we'll be making sure those agreed models will be implemented... now things have become tighter we have to be more efficient and effective, that's what we're trying to do, so it's more about tightening up on how can we be as productive as we possibly can without dealing with the impact of staff reductions."

He said UON would spend $15 million next year demolishing its asbestos-ridden Hunter Building.

"With the Hunter decamp we've put people into new places, refurbished the spaces and the way we've designed them with open office and multi purpose teaching areas we get better efficiencies."

He said UON had invested in enabling works for its STEMM facility and precinct, but decided not to proceed with construction.

"The STEMM project had to be stopped formally and then we reapportioned the costs associated with it."

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