How increased tertiary funding would boost GDP

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A permanent increase in university funding could be a cornerstone to the government’s goal of closing the gap with Australia by 2025.

NZIER and Universities New Zealand – Te Pōkai Tara joined research forces to see what impact increased tertiary funding would have on GDP.

The resulting report concluded government investment in New Zealand’s universities would provide a significant permanent increase to GDP.

To illustrate the effects of increased funding on the economy, the researchers modeled an additional $40 million in university teaching and research for each of the next five years - $200 million in total.

The research showed the return on investment would be an increase in GDP of 0.12% per year, amounting to $370 million per year by 2025.

Within 15 years, the additional investment in universities would be returning 1.85 times the value in GDP every year, according to the study results.

According to the report the additional funding should be invested largely in undergraduate bachelor’s degrees that can promise higher returns.

Lower level sub-degree qualifications such as certificates and diplomas, or higher – such as postgraduate studies – would not provide the same gains for the economy.

The government currently invests just over $1 billion a year in universities and a similar amount in financial support for university students.

Universities NZ chairman Derek McCormack said a permanent increase in university funding would result in even greater and increasing returns to GDP over time.

“The reality is that government funding for New Zealand’s universities has been declining in real terms year after year.

“The report highlights the significant lost opportunity that is a result.”

The Australian government significantly increased levels of investment in education, after a similar report with similar finding was carried out by KPMG EconTech for Universities Australia in 2009. 

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