The Budget has delivered a "body blow" to universities that will see academics running overseas for a more secure income, says one sector leader.

It has slashed many of the funds tertiary providers use to deliver services, including paying competitive salaries, and has not provided for growth, despite increased enrolments which will result in even more students than estimated for next year.

Auckland University of Technology's vice-chancellor Derek McCormack said the National-led Government had dished up universities a Budget that was "lacking in courage, insight and vision because now was the time to invest in improving access to university education, not shutting it down".

"I would say the Budget is a body blow for universities," he said.

Among the contentious cuts is the abolition of the agreement universities drew up with the previous government to lock pay rates for academics, so they would be competitively paid compared with their overseas counterparts.

Called Tripartite funding, this has provided $22 million in each of 2008 and 2009 to New Zealand's eight universities, to support modest salary increases for staff.

University of Auckland vice-chancellor Professor Stuart McCutcheon said university lecturers and researchers were highly valued worldwide and New Zealand universities were already struggling to keep staff as offshore universities were able to offer more appealing packages.

"These salary increases were permanent, not temporary, and now we have lost the funding supporting them what does the Government expect us to do?" Professor McCutcheon asked.

"At the very time that we see countries, such as Australia, Canada, the US and China, ramping up their investment in research, our Government takes an action that has the potential to cut the salaries of our researchers, cut their jobs or send them offshore.

"This is a hugely damaging and backward step that will have devastating consequences," he said.

And while the Budget provides for a 1.95 per cent Consumer Price Index adjustment in overall university funding, Professor McCutcheon said this failed to take account of the increased costs faced by the universities which far outstripped the CPI.

Professor Roger Field, chairman of the New Zealand Vice-Chancellors Committee, said the Government had anticipated growth in university enrolment without providing commensurate funding.

In light of the Budget's treatment of universities, Professor Field yesterday renewed his committee's call for savings achieved through reduced tertiary education compliance costs and cuts in bureaucracy to be reinvested in the sector.

"The current recession is the time to invest in universities' key role in increasing professional skills, innovation and research output," he said.