The Government will fund nearly 3000 extra places at universities over the next two years to address the spike in demand for fulltime tertiary study.
But it has come under fire for taking money from industry training to pay the $55 million bill.
Tertiary Education Minister Steven Joyce yesterday said the money would provide another 1580 places next year and 1315 in 2012, above projected funding levels.
The availability of the extra money came from changes announced last week to lift the performance and accountability of industry training organisations, and reprioritising spending which has come in under budget in that area.
Mr Joyce said the move reflected the nature of the economic cycle.
"As New Zealand recovers from recession, there remains strong demand for full-time degree study and less demand for industry-based training," he said.
That trend will probably start to reverse again over the next few years.
Mr Joyce said the move would be beneficial to the wider economy as the significant increase expected in the number of university graduates from 2013 would help create a platform to support future economic growth.
At 119,000, the number of fulltime places funded in universities next year would be the highest ever, and total funding to New Zealand's eight universities would be about $1.38 billion, Mr Joyce said.
The Council of Trade Unions said the reshuffle of money "beggars belief".
CTU secretary Peter Conway said it was good to see extra places being funded, but it beggared belief that at a time when unemployment was rising and the economy stalling, the Government would pull funding out of apprenticeships and industry training that underpinned the economy and would help avoid skill shortages.
"Even if numbers of trainees are down in this period, the Government could put additional funding into other forms of vocational education that would lift both skills and job opportunities," he said.
Mr Conway noted that polytechnics and wananga wouldn't benefit from the funding switch, and that the change followed cuts for night-classes and early childhood education.
The Union of Students' Associations welcomed the funding boost and said it was a positive step.