The University of Auckland has dropped out of the world's top 200 universities, dealing another blow to New Zealand's $4.5 billion international student industry.
The latest Times Higher Education rankings list no New Zealand universities in the top 200 for the first time since the rankings started in 2004.
In contrast, the top 200 include nine Australian universities, raising fears that well-heeled Kiwi students as well as foreign students will opt to study across the Tasman.
The news comes on top of a 5 per cent drop in New Zealand's international students last year caused by tighter enforcement of English language requirements and a crackdown on cheating by agents in India, where student numbers fell by 28 per cent.
Universities have been one of the few bright spots in the international student business, growing numbers by 7.5 per cent last year in contrast to declines in polytechnics, English language schools and private training providers.
But Universities NZ director Chris Whelan said the loss of universities in the top 200 risked diverting students from what is now our biggest student market, China, to countries that are still in the top ranks.
He said some Asian countries offered scholarships for their students to pursue postgraduate study in any country they chose "as long as it's a top 200 university".
But he said rankings were only one factor in students' decisions.
"About 86 per cent of students consider rankings, but it's only a major factor for about 15 to 20 per cent of students," he said.
The Times ranking is one of two main ranking systems. NZ universities are also dropping in the rival QS rankings but two are still in QS's top 200 - Auckland at 85th and Otago at 175th.
Both systems are based partly on large surveys asking academics about which universities have the strongest reputations for teaching and research.
The Times survey gives a heavier weight (30 per cent) than QS (20 per cent) to citations - the number of times a paper is referenced in other papers in academic journals.
Both organisations are London-based and both their academic surveys and the journals they search are biased towards English-language countries. The Times' top 200 include 60 universities in the United States and 30 in Britain, but none in Latin America or India and only one (Cape Town) in Africa.
The University of Auckland's decline this year was due to lower scores for teaching reputation and research income from industry, although it was still ranked ahead of all other NZ universities on both factors.
Auckland and Otago are both now ranked in a band between 201st and 250th in the world - a place which Auckland's deputy vice-chancellor John Morrow said was more damaging than last year's slide from 165th to 192nd.
"We could be anywhere from 201 to 249. It's more damaging reputationally to be in that vague zone," he said.
However AUT (formerly Auckland University of Technology) and Canterbury University both improved their rankings. AUT climbed from between 401st and 500th last year to between 301st and 350th, and Canterbury improved from between 351st and 400th to between 301st and 350th.
AUT vice-chancellor Derek McCormack said AUT gained the highest NZ ratings for citations and for "international outlook", a category based on the proportions of international students, staff and internationally co-authored papers.
A sixth (17 per cent) of AUT's equivalent fulltime students, and 47 per cent of its academic staff, are from overseas.
McCormack said AUT's high citation rate reflected its large health and sports science faculty, which "tends to be more highly cited".
"A higher percentage of our research is in that field, and we have a smaller amount of research overall, so we have the advantage of that weighting," he said.
Morrow said all NZ universities received much less funding per student than their counterparts in Australia and elsewhere. He said the Government's decision to spend $550 million fees-free tuition for first-year students added nothing to the universities' income.
But Acting Education Minister Tracey Martin said the fees-free policy "has absolutely achieved its objective to reduce the cost burden of tertiary education on students".
"This Government is providing the biggest across the board increase of 1.6 per cent to tuition subsidies for universities in more than five years," she said. The increase will take effect from next January.
National Party tertiary education spokeswoman Paula Bennett said the fees-free policy was "nothing but an expensive bribe which has had no impact on encouraging more students into tertiary education".
"It's time the Government admitted that this is a $2.8 billion failure which has meant there's no funding available to increase resourcing and improve the quality of our universities," she said. "It's all gone on students who would have attended tertiary education anyway."