"If we followed that, we would have increased the budgets of those faculties and made large numbers of people in the arts, creative arts, the business school and the law school redundant," he said.
Mr Joyce responded that he would step in to force change if necessary.
"If they want us to be more directive, I'm more than willing," he said.
Engineering and information technology are the two occupations in most demand on the jobs website Seek, and Mr Joyce sees lifting student numbers in those areas as crucial to economic growth.
The 8.8 per cent Budget increase gave the institutions an extra $12 million a year from next January, or $42 million over the four fiscal years up to June 2016. A TEC spokeswoman said all of that money had to be used for engineering, raising the subsidy for each student.
"The increases cover degree and diploma students at levels 5 and above on the qualifications framework. Just over half will be in polytechnics and the rest in universities."
Mr Joyce said engineering numbers would go up in Auckland alone by 150 at Auckland University and by unspecified numbers at AUT University, Unitec and Manukau Institute of Technology.
Engineers NZ chief executive Dr Andrew Cleland said the extra funding should produce about 300 extra engineering graduates a year by about 2016. That would help lift the number of engineering graduates from 1500 a year in 2008 to an interim target of 2000 a year required for "business as usual" economic growth.
Engineers NZ says the country needs to lift the number to 2750 a year to achieve an "innovation-led economy" with a chance of catching up to Australian living standards.
Tertiary Education Union president Sandra Grey said the effects on other faculties of "reprioritising" 300 student places would depend on whether institutions were close to their enrolment caps.
