AUSTRALIA'S multi-billion-dollar Indian student market has collapsed in just 12 months.

This is because new students are turning their backs on the once-prized Australian education sector in favour of Canada, New Zealand and Britain, The Australian reported.

Enrolments from the Indian student market -- which until last year was showing annual growth rates of up to 40 per cent and was worth almost $3 billion a year to the Australian economy -- have been dropping since March.

By September, commencements were down almost 50 per cent on last year, due to the combined effect of onerous new financial requirements, last year's street attacks on Indian students, vocational school closures and the rising Australian dollar.

The sharp decline is expected to cost Australia and Victoria in particular dearly, as it had attracted most of the Indian students over the past decade.

The education sector is Australia's fourth-largest export earner, contributing more than $17 billion last year.

Economic modelling for the Australian universities sector in August warned that a worst-case scenario -- in which new foreign student enrolments in higher education institutions would drop by 30 per cent by 2015 -- would cost 36,000 jobs nationwide.

And a recent Access Economic report for the Australian Council for Private Education and Training warned of a $3.8bn hit to the economy by 2012 if the decline in overall international student numbers continued.

The latest student visa and enrolment statistics show the education sector's "perfect storm" is now looming.

International Education Association of Australia president Stephen Connelly said Australia was on track to lose 125,000 foreign students in two years by the end of next year, translating to massive job losses at universities and allied sectors.

The government's statistics show new foreign student visa numbers have dropped from 320,000 in 2008-09 to 270,000 in 2009-10, and the numbers are now falling more steeply.

Enrolments from nine out of Australia's top 10 source countries for foreign students are in decline, but India has experienced by far the largest fall. Many Victorian institutions have recorded a drop in new applications of more than 50 per cent this year.

Education agents have reported declines of up to 85 per cent in expressions of interest by Indian students considering taking courses in Australia.

The major cause is the new requirement this year that foreign students show they have enough money to cover living expenses, return airfares and tuition fees for the duration of their course -- an amount that frequently exceeds $100,000 in total.