Tertiary students should be charged much more if the Government is unwilling to invest enough to keep universities competitive, the country's largest university says.

University of Auckland vice-chancellor Stuart McCutcheon believes there is a strong case for following Britain and Australia's lead and raising the cost of study.

Fee deregulation or a similar system would allow universities to set their own fees and would likely lead to increases well above the current annual maximum 4 per cent.

In Australia, the proposed changes were part of the Abbott Government's Budget and have been hugely controversial. Similar reforms in Britain were met with angry street protests.


Professor McCutcheon said deregulation or a similar option would be similarly controversial here, but hard decisions had to be made.

The latest international rankings released today show New Zealand universities losing ground or stagnating.

The University of Auckland is the country's top-placed at 175 on the Times Higher Education rankings, a slip of 11 places since last year.

Professor McCutcheon said such league tables were the main way international students judged quality, and the downward trend put the funding of universities at risk.

International students - and the high fees they pay - have become increasingly important, with all institutions attempting to increase them after domestic numbers and attached funding were effectively capped.

The funding available to NZ universities on a per-student basis was comparatively very low, Professor McCutcheon said. If the Government would not increase it substantially, then another way needed to be found.

In the past 20 or 30 years university participation rates had increased greatly in Western countries, but the conversation was now moving away from the "bums on seats" model. "The rankings have focused attention on quality. And you see this in the British system, in the Australian system, saying, 'Well, some institutions are going to offer a higher-quality product with benefits for their graduates'."

Under proposed Budget changes, Australian universities and other accredited providers would set their own fees from January 2016, with the Government reducing tuition funding.


Moves to increase fees in Britain from 2012 set off street protests, but Professor McCutcheon said there had been very little effect on enrolments.

If fee deregulation was allowed then universities would increase scholarships for students from disadvantaged backgrounds, he said.

Tertiary Education Minister Steven Joyce flatly ruled out any move to fee deregulation or to allow increases over 4 per cent. He disagreed with Professor McCutcheon's analysis of the available options. More government funding was being put into the sector, he said, including a 24 per cent rise over five years at the University of Auckland.

"To me, the most important option is to continue to grow his university's income, particularly through international income ... and work hard to take a strategic approach."

The NZ Union of Students Associations president, Daniel Haines, said increasing fees to try to plug a funding gap would have a horrific effect on debt and equity of access.

He also questioned whether it would raise more funds as more people were likely to be put off studying.

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