A recent report in the Herald points out that New Zealand universities have slipped down considerably in the most recent Times Higher Education rankings of universities. The University of Auckland, the country's top-rated university, has slipped from 150 to about 200. No other NZ university rates in the top 200.

This is a concern because education is one of the largest export sectors in this country and is approximately a $3 billion industry with nearly 30,000 jobs. International fee-paying students who are a major source of our revenue pay close attention to international rankings. This drop in rank will lead to a drop-off in international enrolments which, in turn, will lead to even lower revenues in the future.

New Zealand universities are particularly dependent for their very existence on students from Asia. But there is a limit to how long this can be sustained because the Chinese and the Indians are beginning to wake up to this fact and have started investing heavily in education themselves.

Lower ranking also means greater difficulty in recruiting high-quality staff in a dynamic international market. Good domestic postgraduates will consider going to better-placed institutions. Many of our best high-school graduates will choose higher-ranked Australian, US or European universities; already a growing trend.


But it's not just a question of revenues and budgets. Universities play a vital role in the education and research life of a nation. They are the repository of much of the knowledge that defines who we are as New Zealanders. This is why developing countries always try to build a strong university sector. This is why the growing economic powers of Asia are devoting immense resources to university development. They understand well the vital combination of economic and cultural roles played by a strong university sector.

Faced with this somewhat catastrophic drop in the reputation of NZ universities, how has the Government responded?

The Government has decided that our universities must respond better to market forces; namely, produce more graduates in those areas where there are jobs.

Further, the Government plans to introduce legislation that will make radical changes to size and composition of university councils. The aim here is to make the councils more responsive to the needs of the marketplace.

Leaving aside the fact that these changes go to the heart of issues with the universities' academic freedom as envisioned in the 1989 Education Act, the fact remains that there will always be skills shortages.

Today it is engineers; tomorrow it might be surgeons or accountants or radiologists.

This does not mean that the university's basic mission must be constantly revised in order to meet those challenges.

A crucial humanising role of our universities is the creation of educated citizens who are vital for a well-functioning democratic society.


Changing the university's fundamental mission and goals in order to address short-term market imbalances may not only fail to address the short-term malady but has the potential to inflict enormous damage to this country's institutions of higher knowledge and on our society as a whole. But the more important question is: are these the right approaches to address our precipitous loss of reputation?

Consider this. New Zealand spends about 1.5 per cent of its GDP on tertiary education. In percentage terms this is just about the OECD average. But NZ's GDP is so much smaller than other countries'. Consequently according to OECD reports, in 2010 the average OECD spending per student was approximately US$14,000 ($16,540).

For New Zealand the corresponding spending was US$10,000. Countries like Norway and Finland spent on average US$18,000 and US$17,000 respectively.

The list of OECD countries that spend less per student includes Iceland, Italy, Slovenia, Poland, Slovak Republic, Estonia, Czech Republic and Hungary.

However, it is not so much the case that we are not performing well - indeed dollar for dollar we are doing quite well - but that other countries, particularly Asian ones, are investing a lot more in higher education and progressing faster and we are struggling to keep up.

New Zealand with a population of a little over four million has eight universities. Norway with one million more people has eight universities too. Of those the highest ranked, according to QS World University rankings - a different ranking system from the better known Times Higher Education rankings - is the University of Oslo. Its rank has improved from 177 in 2006 to around the 100 mark for the past five years.

In the meantime, using the same system of ranking, the University of Auckland has fallen from 46 in 2006 to 94 in 2013.

So an alternative argument might be to re-evaluate the very nature of university funding in this country. We may have to ask the challenging questions: can we afford to fund eight universities on a similar basis?

Do we need more specialised institutions, among which only one or two can be funded to truly international levels?

This is the solution which has been adopted in Finland. With a population similar in size to that of New Zealand, Aalto University was established in 2010 with the goal of becoming an international university of world-class stature.

With substantial funding from the Finnish Government and the private sector, Aalto University was given a high degree of financial independence to achieve its goal.

What is clear is that an inexorable decline in standards cannot be met with the policy responses which have marked the past 30 years.

Ananish Chaudhuri, Nigel Haworth and Michael Myers are respectively department heads of Economics, Management & International Business and Information Systems & Operations Management at the University of Auckland Business School. The views expressed are their own.