Budget a chance to unlock universities’ full potential to enhance New Zealanders’ wellbeing and prosperity

Budget 2022 is a chance for the Government to better support universities and enhance their huge contribution to national wellbeing and providing the skills and solutions New Zealanders need to prosper and succeed, says Universities New Zealand – Te Pōkai Tara Chief Executive Chris Whelan.

“Finance Minister Grant Robertson has highlighted the challenges Aotearoa New Zealand faces in the wake of Covid-19, as it confronts climate change and seeks to secure the economy amid the impact of war in Ukraine. But the only brake on the country’s eight universities and the many contributions they are already making to addressing these issues is the Government itself and how willing it is to invest in the universities,” says Mr Whelan.

“Universities hold the key to dealing with all the megachallenges this country will have to navigate in coming decades – including climate mitigation and adaptation, improving wellbeing and living standards, infrastructure imperatives, lifting productivity, and the future of work.

“New Zealand has been able to respond quickly and effectively to Covid because it was quickly and freely able to access expertise across the university system in areas such as epidemiology, virology, immunology, sociology, public health and data modelling.

“To navigate similar future challenges, New Zealand needs a university system with expertise across the widest possible range of fields of knowledge that can bring multidisciplinary and interdisciplinary strategies to government.”

Universities are critical infrastructure, says Mr Whelan. As well as providing the necessary funding to enable them to maintain their existing capability, the Government should support them in the areas where they can and want to do more.

These include:

• Helping to improve New Zealand’s productivity and innovation by getting degree attainment into the top quarter of Organisation for Economic Co-operation and Development (OECD) rankings. At present, just 7% of adult New Zealanders have a postgraduate qualification, compared with an OECD average of 15%.
• Continuing to grow universities’ ability to support a wider range of learners and learning styles in order to achieve more equitable participation rates.
• Growing the country’s workforce in areas that align with future needs and priorities.
• Deepening connections between university researchers and organisations addressing the country's greatest challenges – for example, those working in areas such as wellbeing, climate adaption and Covid recovery.
• Making university research a magnet for international entrepreneurial investment and, in turn, for driving diversification within the New Zealand economy. Despite having just 0.06% of the global population, New Zealand produces 1.9% of the world's most highly cited research. “Imagine what we could do with better investment,” says Mr Whelan. 
• Fostering a more diverse and inclusive research workforce to ensure the social, economic and cultural benefits of research and innovation are applied and enjoyed more equitably.

The stock of all knowledge generated by New Zealand’s universities and adopted over time across the wider economy accounts for around 8.2–9.7% of gross domestic product (GDP), according to a Universities New Zealand-commissioned report by the New Zealand Institute of Economic Research.

Universities generate a quarter of research in New Zealand. A 10% increase in their research spending would eventually increase GDP by 1.75–1.84%. That is, another $120 million annually would generate another $6 billion in economic activity over the following decade.

New Zealand’s GDP is 3%–6% higher because of the impact a university education has had on the productivity of the workforce with a university qualification. As well as being more productive themselves, graduates lift the productivity of other employees in their workplace. This accounts for around 0.8% of GDP.

Government directly or indirectly controls 75% of university income through Student Achievement Component (SAC) funding, the annual maximum fee movement and Crown research funding.

Although universities’ operating costs in the past 15 years have increased by more than 80%, SAC funding has increased by just over 50%. Total funding of New Zealand universities is significantly less than comparable OECD countries such as the United States, United Kingdom, Canada and Australia.

Total spending on university and other organisations’ research by the Government and private sector is less than 1.5% of GDP, with a government target of 2% in the next 10 years. The OECD average, however, is 2.5%.

Universities have progressively exhausted their cost-reduction and revenue-raising options in the face of continued government underfunding and simultaneous requirements they maintain 2–3% surpluses and cap student fee increases (currently at a maximum of 1.7%), says Mr Whelan.

“At the same time, they face new compliance costs and are implementing important programmes such as those to support student mental health and to achieve more equitable outcomes for students.

“Universities made all the savings they could to navigate the financial impacts of Covid-19. Now, inflation is at a three-decade high and salary expectations are correspondingly higher. Universities have no room left to manoeuvre.

“One of the Covid impacts, the reduction in international students because of closed borders, emphasises the risk of being left to rely on international student income to offset the underfunding of domestic students. Recovery in international student numbers after borders reopen is expected to take years.”

It is time, says Mr Whelan, for government funding to stop holding universities back and instead unlock their full potential on behalf of New Zealanders.