Public Funding for Tertiary Education

IBISWorld forecasts that public funding for tertiary education will increase by 6.0% in 2023-24, to total $5.27 billion. A resurgence of net migration after the pandemic and a growing number of high school graduates underpins this growth. Demand for tertiary education among New Zealanders is generally counter-cyclical, rising in times of deteriorating economic conditions. Due to a tight labour market and the negative impact of the pandemic on business confidence, many companies are limiting new hires this year. This situation encourages more New Zealanders to enrol in tertiary education and training courses, such as apprenticeships, delaying entering the workforce. The pandemic-induced drop in international student enrolment, who pay higher fees, strained tertiary institutions. While recovery is visible, additional Central Government funding is necessary to sustain them, and capital has been allocated for enrolments in 2024.

Over the past five years, the Annual Maximum Fee Movement (AMFM) imposed by the Central Government has fallen, pushing up public funding for tertiary education. The AMFM is a rate set by the Central Government that represents the maximum percentage by which tertiary education providers can increase their fees. Up to 2015, the AMFM was set at 4.0% each year but was reduced to 3.0% in 2016 following public concerns regarding the affordability of tertiary education. The AMFM was further reduced to 2.0% in 2017 and remained at this level for 2018 through 2020. In 2021, the AMFM was reduced significantly to 1.1% to assist the affordability of tertiary education during the COVID-19 pandemic. However, an additional 1.1% who successfully applied for an exemption was permitted. In 2022, the AMFM rate was set at 1.7%. The lower AMFM has restricted tertiary education's revenue from student fees. As a result, increases in public funding have been required to subsidise universities, Wananga and ITP places. The AMFM rate increased to 2.75% in 2023 and 2.8% in 2024, providing tertiary education providers with flexibility to manage cost rises.