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New Zealand has a large higher education sector, with one of the highest rates of tertiary participation in the OECD. Under the 1989 Education Act, access to university is an entitlement for all students who successfully graduate from high school and, more uniquely, for all permanent residents, regardless of previous educational attainment, once they reach the age of 20 years. The system of budgetary support for higher education is also unusual, insofar as almost half the total funding goes directly to students (in the form of allowances and interest-free loans) rather than as grants to the providers. Sustained high participation rates have put this funding mechanism under strain over the last decade.
The global financial crisis has led to a sharp rise in projected public debt levels. After a major fiscal stimulus package in 2009, the economy is recovering and the government is under intense pressure to cut public spending. New Zealand has very high external debt levels, requiring constant refinancing, and the government needs to restore fiscal stability to retain the country’s AAA credit rating. New government policies are aimed at capping total enrolments in higher education and withdrawing access to loans for under-performing students. Grants to universities have been frozen for 2011 and some related funding lines cancelled. All eight New Zealand universities are currently facing a significant loss of government funding from 2011 and most are in the process of cutting costs and making redundancies.
In the years ahead, the demands on the public purse from an ageing population will intensify, forcing the government to make ongoing real terms cuts to spending on higher education in order to control government debt. These cuts will make the present funding model for New Zealand higher education unsustainable. Alumni donations in New Zealand are relatively uncommon as higher education is widely considered a public service and universities have been relatively unsuccessful in very recent years at growing international enrolments as a way of diversifying their revenue base. The only other source of significant revenue is for universities to be allowed to raise domestic tuition fees over time to full cost-recovery rates and for the government to target declining tuition subsidies and student allowances and loans more precisely on degrees with a strong ‘public good’ dimension (like teacher training) and low-income students.
These changes would signal an end to affordable and easily accessible higher education for New Zealand students. It is hard to avoid the conclusion that the global financial crisis has exposed flaws in the underlying ‘business model’ of New Zealand higher education and, by so doing, is likely to hasten the transformation of the system to a more expensive and selective system.
Higher Education Summit, Auckland, March 2010