Alarm bells sound on tertiary education budget
Demand for tertiary education and training is set to blow out current baselines.
The forecasted volume of students able to be funded under baselines extending to the 2026-27 financial year is greater than the amount of funding allocated to the sector.
Tertiary education was the only 'changed risk' listed in the financial update's changing demand and expectations on services section, after a turbulent few years of departmental cuts to universities nationwide and the disestablishment of Te Pūkenga.
The risks behind the tertiary education budget changed after Budget 2024 was released. A higher than expected number of enrolling young people is now expected to exceed the amount of funding available to support them.
Extra funding had been allocated in Budget 2024 for the tertiary sector, which was reeling in the wake of Covid-19 lockdowns. Universities nationwide made cuts to various departments, mostly in the humanities and social sciences.
'Hard' sciences and economics fared the best, a trend amplified by a targeted $64 million subsidy announced in Budget 2025 for Stem subjects.
Young students, 18-19-year-olds specifically, will now face a double blow. University fees were set to rise by 6 percent for the second consecutive year, after years of maximum fee hikes of about 2.5 percent.
Maintaining the high proposed fee ceiling 'reflects that fees have lagged behind inflation in recent years, making it harder for providers to maintain course quality', said Minister for Universities Shane Reti.
Indeed, in the wake of Covid-19 border closures, inflation soared to 6.9 percent while fee hikes remained capped at 2.8 percent, in effect decreasing for three years.
Until last year, that higher fee was avoidable in a student's first year, but fees free was moved to the final year in Budget 2024.
This move ended up less cost-effective than the Government had expected. More students were eligible for the rebate than estimated, and the four-year cost of this programme rose from $13 million in Budget 2024 to $103m in Budget 2025.
The Revenue (IRD-Crown) contribution to this initiative was blank in Budget 2024, but contributed the entire $103m spend in 2025.
Some students were eligible for a final year fees free rebate if they had not taken advantage of first year fees free.
Final year fees free would apply to the final year of any eligible tertiary qualification, including non-degree programmes. These can take just one or two years to complete. A miscalculation of the number of these students seeking the rebate could have contributed to the shortfall.
A separate $76m, outside of budget, was allocated for reimbursing students for goods and services tax paid on their fees.
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