New Zealand universities are falling in international rankings and without a radical rethink of funding will struggle to attract top students and staff, a university leader has warned.

Auckland University vice-chancellor Professor Stuart McCutcheon said the university system had lost ground in even the most generous of international rankings.

"Although the universities do a better job each year, other university systems that are better funded are rising through the ranks. That's a huge problem, because international students particularly use the world rankings as a mark of quality."

New Zealand universities are aiming to grow their numbers of international students, after a change in government funding effectively capped domestic student numbers, and the funds that go with them. Professor McCutcheon said that was at risk.


"Financially, if it were not for international students, most New Zealand universities right now would be making a loss.

"The real risk to us is if the rankings keep falling, the international students decide not to come to New Zealand universities ... and then you get into a vicious cycle spiralling downwards."

However, Tertiary Education Minister Steven Joyce said universities had improved or held their places in the latest round of rankings. The Government had increased funding to Auckland University by 13 per cent from 2008 to 2011, he said.

"We actually have an excellent system which is efficient. Most countries would give their eye-teeth for the sort of outcomes that we are getting out of our tertiary system."

Mr Joyce said New Zealand institutions had less funding per student than Australian counterparts, but a large part of that was fewer international student enrolments.

"I would argue that that is something that the universities have neglected for some time. Not all of them, but certainly some of them."