The Great RTO Downturn of Student Enrollments 2026
Australian RTOs are facing a sharp drop in student enrollments and compliance-focused training culture may be to blame. Discover why employer confidence in VET is fading, and what it takes to stand out from the crowd.
4/28/20264 min read
We have experienced an increase in RTO contact from previous and new RTO’s seeking to increase their overall business in student enrollments across most qualifications.
The RTO’s we hear from share the same issue, being the downturn in student enrollments, and lack of new students or new business wanting to enroll. This has been particularly noticeable during 2026. Some RTO’s report a drop in enrollments by over 40% compared to this time in 2025.
Reasons for this vary; however, we would like to offer our view of what we have seen that has contributed to this downturn.
RTO’s have placed the compliance focus as the end game of their product, rather than the ‘education’ of the student. This means that meeting the (minimum) compliance obligations of the Outcomes Standards is key to running an RTO, and they often forget about educating the student.
Compliance is only the ‘minimum’ requirement to operate as an RTO and is of no benefit to the student or the businesses they will work for. The new standards deliver a minimum compliance obligation and have no bearing on the quality of your education product. After meeting compliance obligations, ready for audit, you then need to focus on the quality of the education as a product and service, which most RTO’s have missed.
DATA: Fee-Free TAFE attracted more than 685,000 student enrollments since its January 2023 launch. Meanwhile, private RTO funding allocations in states like NSW have been slashed without consultation, with some providers losing 70%+ of their government-funded places. (Source: IBISWorld 2025; Vivacity Coaching & Consulting, June 2025)
“Compliance is the floor, not the ceiling.”
Questions that RTOs should ask include:
Are our graduating students job-ready with skills and knowledge that will be helpful to a potential employer?
Has our training taught students how to perform industry skills with high levels of knowledge, ready for the job market?
Would a potential employer be impressed or disappointed by the performance of our students if they were hired?
Do businesses recognise our education and training as an asset to their business operations, or are you just another face in the crowd, certificate?
Do businesses prefer your RTO over other RTOs?
We see this in high school graduates and higher education, where a business may favour certain schools and universities over other high schools or universities based on reputation, but we don’t see this attitude towards favoured RTO’s. The VET industry seems to be seen as the same ‘compliance-focused’ operation rather than delivering excellence in job-ready candidates.
Result: poorly trained and educated students from another compliance-ready RTO.
All industries and businesses operating on the ‘minimum requirement’ produce substandard products. I am unaware of any in-demand products or services that offer minimums. Consumers seek value for money in quality product and service, and unfortunately, most RTO’s fail to see this in the education product they offer.
I would like RTO owners and managers to ponder the following questions;
Would you enrol your children in high schools with reputations for producing poorly educated students with poor HSC results?
Would you pay for and enrol your children in a university that no one has even heard of?
Would enroll into a training or education product that has no future employment prospects?
The new standards might allow for certain activities to occur as a minimum, but is this delivering quality in education?
DATA: Jobs and Skills Australia's 2025 report found that 139 occupations have been in ongoing shortage since 2021 — more than half in Technicians and Trades roles. Persistent mismatches between training outcomes and employer demand are identified as holding back national productivity. (Source: Jobs and Skills Australia, Jobs and Skills Report 2025)
In summary, here is a most likely overview of what may have happened to VET qualifications and RTO reputations:
Validation of tools and materials is done internally by poorly trained validators to meet compliance obligations that tick the box.
Industry engagement is done via a meaningless, non-genuine email from someone with a business that you have never met, who meets compliance obligations that tick the box.
The learning materials are designed around a unit of competency rather than an industry or the skills needed to succeed in a job.
The assessment tasks are ‘unit of competency focused’ rather than teaching students how to competently perform in the workplace.
Authenticity in assessment no longer supports the students' assessments as the genuine or original work of that student (ChatGPT).
Businesses see how RTO’s now embrace AI to educate and assess students rather than delivering excellence in education.
Businesses no longer value VET as places that produce skilled, job-ready people fit for employment.
Students know that businesses are aware of this, so they stop investing in their own education and training.
It’s up to your RTO to win back consumer confidence with your customers. Your customers are looking for quality education providers that deliver job-ready skills and knowledge that employers are looking for.
Are you a quality RTO, or just another face in the crowd?
You have some work to do!
This topic is available in Episode 10. Industry Engagement & Risks For RTOs
