The New Zealand government’s annual Budget increased funding to universities but leaves them facing significant pressure.

It provided a 5% increase to per-student tuition subsidies from January next year, the biggest increase in 20 years but short of annual inflation that has been running above or close to 7%.

Universities New Zealand and the Tertiary Education Union welcomed the increase but warned that the country’s eight universities are in a difficult situation.

They lost thousands of foreign students from 2020 to late 2022 due to COVID-related border restrictions and a jump in domestic enrolments in 2021 has dropped away, resulting in moves to cut spending and potentially staff at several institutions.

Universities New Zealand Chief Executive Chris Whelan said universities were losing ground financially.

“Looking just at this year and the next two years, actual and forecast inflation for 2022, 2023 and 2024 will be around 15.5%. With today’s announcement, tuition funding will only be increasing by 9% over the same period. We are continuing to slip backwards in our funding per student,” he said.

“While we acknowledge the increase to tuition funding in Budget 2023, the situation for universities remains precarious.”

Tertiary Education Union National Secretary Sandra Grey said the subsidy increase did not match inflation, but it was the first sign of genuine recognition of decades of underfunding of tertiary education.

“The 5% funding boost announced today should go some way to ensuring students have access to quality education, provided the institutions invest in people. Looking long term – we are ready to talk, as staff and students, to address the historic underfunding that has destabilised provision,” she said.

Grey said institutions that were planning cuts, such as the University of Otago, should re-think their plans.

The Budget also increased funding for courses in Maori knowledge and language by 15% and provided NZ$55 million (US$34 million) for research fellowships and an applied doctoral training scheme.

Meanwhile tertiary students were not impressed by the Budget.

The president of the New Zealand Union of Students’ Associations, Ellen Dixon, said the Budget was a step in the right direction in that it prioritised apprentices, trainee teachers and maintained a free first year of tertiary study.