Profile & Trends 2005: New Zealand's Tertiary Education Sector

Publication Details

This is edition eight in an annual series on the tertiary education sector. Profile & Trends has an associated set of tables available on the Tertiary Education Statistics page here on Education Counts.

Author(s): Tertiary Sector Performance Analysis and Reporting, Ministry of Education

Date Published: December 2006

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The following is a summary of the key findings of the Ministry of Education's annual report on the tertiary education sector.

Key Findings

A key focus for the tertiary education sector in 2005 has been the consolidation of the reforms of the previous three years. The emphasis in the Statement of Tertiary Education Priorities 2005/07, released during 2005, was on lifting the quality and relevance of what the sector offers students, research users and wider stakeholders and, consequently, improving outcomes for learners. A tertiary education system with a focus on quality and relevance will improve the value learners get for the time and money they invest in tertiary education, while it improves the return to society for its investment in the system.

Educational achievement has increased in recent years; proportionally more people hold a tertiary qualification – degree, postgraduate or vocational. Recent research on the employment outcomes of tertiary education shows that those with tertiary qualifications have higher earnings than others. However, between 2002 and 2005, those with school qualifications and qualifications below degree level have seen their earnings rise. This reflects the strong labour market, which has the effect of reducing unemployment among groups whose highest qualification is below degree level.

More people enrolled in tertiary education in 2005, although the full-time equivalent student count declined slightly. There was a significant decline in community education – a consequence of the government's wish to refocus community education on a small number of priority areas and its move to strengthen the quality and relevance of tertiary education provision below degree level. Student retention at degree and postgraduate levels continued to improve in 2005. Some disparities in tertiary education outcomes between ethnic groups persist. While the proportion of Māori holding a tertiary qualification below degree level is close to that for the rest of the population, growth in the proportion with a bachelors or higher degree has levelled off. The proportion of Pasifika students with degrees is growing but the proportion with tertiary qualifications is only just over half the proportion for the rest of the population. Completion rates among Pasifika students are lower than the rates in other ethnic groups. University research contract income from non-government sources increased in 2005.

Looking to 2006

Early in 2006, the government announced proposals to take further steps to improve the tertiary education system's contribution to New Zealand's goals of economic transformation, families – young and old, and national identity.

New Zealand's second strategy, the Tertiary Education Strategy 2007/12, is expected to be published in December 2006. The strategy is expected to build on the reforms that began with the creation of the Tertiary Education Advisory Commission, set up to advise government on future directions for tertiary education.

At the same time, the government set about making further changes to systems for planning, funding, monitoring and quality assurance. These reforms are designed to support the new strategy and will take effect from 2008.

In addition to aligning the tertiary sector more closely with national development goals, these changes aim to build public confidence in the sector and to give government and the sector more certainty. More information about these changes to the tertiary education system are outlined in the postscript to this report and in the forward-looking commentaries included in the chapters.

Statistics and Research

Profile & Trends 2005 has an associated set of statistical tables available on the Education Counts website. These statistics are used to inform the analysis contained in the report. These tables provide comprehensive coverage of the key trends in the sector's performance. The topics covered are: resourcing, financials, human resources, research, student support, targeted training programmes, the Secondary-Tertiary Alignment Resource, adult and community education, industry training, enrolments, equivalent full-time student units, participation rates, completion rates, retention rates, attrition rates, progression rates, and outcomes.

More tertiary education material, including information on the tertiary education strategy, providers, students and other relevant material can be found elsewhere on the Education Counts website and on the websites of the Ministry of Education and the Tertiary Education Commission.

The statistics in Profile & Trends 2005 are for the year ended 31 December 2005 and have been sourced from the Ministry of Education, unless otherwise stated.

Tertiary Education in New Zealand

New Zealand's tertiary education sector makes a wide range of learning available, from foundation skills to doctoral studies. The sector is a major contributor to the nation's innovation through its research activities. More than 60 percent of all New Zealand 's research papers come from the tertiary education sector.

A key feature of the New Zealand system is the integration of funding and provision across vocational education and training, higher education, workplace training, adult and community education, and tertiary education that takes place within the senior secondary school.

A large proportion of tertiary education is funded through the Student Component Fund, which covers all levels of tertiary education, from second-chance education to doctoral studies. Industry training provides workforce skills to a significant number of people. This training is designed by, and delivered in conjunction with, industry and leads to nationally recognised qualifications. There are also targeted training funds that provide fully subsidised education and training to disadvantaged groups.

The government also funds such learning as foundation education, adult literacy and English for speakers of other languages. It also provides funding to adult and community education organisations to support their work and development.

The results of learning through tertiary education can be viewed in terms of improving competencies and attainment, or progress towards attainment, of recognised qualifications. A competency includes all the skills, knowledge, attitudes and values needed to do something. The Ministry of Education has developed a New Zealand framework for key competencies for the tertiary education sector. The government has also established a Learning for Living programme to build adults' fluency, independence and range in language, literacy and numeracy so that they can use these competencies to participate effectively in all aspects of their lives.

The New Zealand Register of Quality Assured Qualifications incorporates all tertiary qualifications. It provides a standard structure for naming and describing qualifications across levels and types of provision. It includes 10 levels of qualification from entry-level certificates to doctorates.

Growth in Enrolments Slows

In 2005, there were 504,000 students enrolled in study programmes at tertiary education providers. Forty-seven thousand of these were international students. In addition, over 162,000 trainees were engaged in industry-based training, including 8,400 Modern Apprentices. There were also 161,000 enrolments in short courses in 2005. Non-formal education such as adult and community education attracted an estimated 360,000 enrolments. It is estimated that approximately 19 percent of the population aged 15 years or over participated in some form of tertiary learning with a tertiary education provider during 2005, including 5 percent undertaking formal learning in the workplace.

While more people studied in 2005, there was actually a decline of 1.2 percent when the numbers enrolled at tertiary education providers are converted to equivalent full-time student terms. A major factor contributing to the strong growth in enrolments in recent years was the increase in international students. This count trebled from 16,600 in 2000 to 50,500 in 2004. But in 2005, the number of international students fell by 3,060. By contrast, domestic enrolments increased by 20,700.

In 2005, 292,000 domestic students,or 58 percent, enrolled in government-funded tertiary education organisations participated in certificate-level study, compared with 69,000, or 14 percent, in diploma study, 153,000, or 30 percent, in bachelors-level study, and 36,000, or 8 percent, in postgraduate study. However, when converted to equivalent full-time student units, then bachelors-level study had the highest participation at 42 percent.

Around 119,000 domestic students completed 130,000 formally recognised qualifications in 2005. This represents an 11 percent increase on the previous year in the number of students who completed qualifications. An estimated 39 percent of domestic students who had started a qualification in 2001 had completed it by the end of 2005. The first-year attrition rate of students in government-funded tertiary education organisations who started a qualification in 2004 was 29 percent, up from 27 percent in the previous year.

Outcomes of Tertiary Education

More New Zealanders have been participating in tertiary education in recent years and in 2005 there was a significant increase, from the previous year, in students completing a tertiary qualification. The overall rise was largely a result of an increase in the number of sub-degree qualifications awarded. There was also a significant increase in the number of students completing a postgraduate qualification, while the number of students completing bachelors degrees fell by 3.5 percent from the previous year.

One in two people in the New Zealand working-age population held a tertiary qualification in 2005. The group comprising all 'other' ethnicities had the highest proportion of its people with a bachelors degree or higher, followed by Europeans, Māori and Pasifika people.

The unemployment rate fell in 2005 for holders of bachelors and higher qualifications, other tertiary qualifications and school qualifications, while it remained unchanged for those without any qualifications. A stronger economy has led to the lower rates of unemployment in recent years. New Zealand's unemployment rates for the tertiary qualified are well below the average for the Organisation for Economic Co-operation and Development (OECD), according to the most recently available international comparisons.

International comparisons also showed that the New Zealand population's overall tertiary attainment in 2004 was well above the OECD average for females and slightly below the average for males. The New Zealand population's attainment of bachelors or higher qualifications was below the OECD average for both males and females, while the gender gap in New Zealand for tertiary qualifications, in favour of females, is now the second largest in the world, after Finland .

In 2006, the OECD calculated the internal rate of return to tertiary education for New Zealand for the first time. Rates of return were calculated for the individual (the private internal rate of return) and for the government (the public internal rate of return). The private tertiary return in 2003 was above the bond rate, meaning that even in a narrow financial sense, tertiary education is a good investment for a private individual. While the return to New Zealanders was higher than to the Danes and Swedes, it was below that of the Americans and the English. The relatively low rate of return in New Zealand reflects the fact that there is less income disparity in New Zealand than in countries like the United States and the United Kingdom . The public return to tertiary education in New Zealand was again positive – it is financially a good investment for the government.

Another recent analysis looked at the earnings of students with loans who recently left study. This showed that those who completed a tertiary qualification had a higher median income, five years post-study, than those who did not complete their qualification. The income premium was higher for bachelors qualifications than for other tertiary-level qualifications. Analysis has also shown that the level and field of study and employment are factors influencing earnings.

The University of Auckland 's economic contribution to the Auckland region was estimated to be $4.4 billion in 2005 in a recent study. Similar studies in other regions have also shown that the presence of a major tertiary education provider carries a financial benefit for the community. Other recent studies on the outcomes of tertiary education showed that, on average, an additional year of education increases future income somewhere between 5 and 15 percent. Tertiary education also continues to contribute positively to New Zealand 's health, social and family outcomes. In addition to making workers more productive, it leads to the creation of knowledge, ideas and technological innovation. In the area of health, for example, studies show that those with post-school qualifications have lower mortality rates than those with no, or only school, qualifications.

Level 1 to 3 Qualifications

Provision of qualifications at levels 1 to 3 of the New Zealand Register of Quality Assured Qualifications has continued to grow in a number of areas. Level 1 to 3 qualifications are equivalent to a senior secondary school education. The number of students enrolled in student component-funded level 1 to 3 certificates has continued to increase, although the volume of provision has stabilised when counted in terms of equivalent full-time students. Within this area, the number of students studying for less than six weeks has grown the fastest. There has been a decrease in the number of students in foundation education qualifications, offset by an increase in those in vocational qualifications. The number of students in courses of a week or less has also continued to increase.

There has been a continued increase in the provision of tertiary education opportunities in schools through the Secondary-Tertiary Alignment Resource funding and Gateway. The number of students in school and tertiary education institution-based adult and community education courses has decreased in response to policy changes.

In 2005, there were 483,000 students enrolled in formal education at levels 1 to 3. The largest number were student component-funded students (206,500) followed by students in courses of one week or less (136,000) and those in industry training (121,200). Up to 360,000 learners participated in non-formal education at this level. The actual total number is not known precisely as many learners will have participated in more than one area during the year. Of the non-formal learners, the largest numbers were involved in adult and community education through tertiary education institutions and schools.

Students accessing education at this level tend to be aged 25 and over. There has been a definite shift towards older-aged students in student component-funded provision. Approximately half of the students accessing adult and community education and courses of one week or less are aged 40 years or over.

There has been an increase in the proportion of students accessing student component-funded qualifications who are already in employment, and a corresponding decrease in the proportion unemployed or on benefits. The numbers of students in Training Opportunities and Youth Training (both targeted to people who are unemployed) have continued to decrease.

Mid-Register Qualifications and Workplace Learning

The recent substantial increases in level 4 qualifications and in workplace learning are notable features of the tertiary education system at a time when overall learner growth is slowing.

The number of learners in level 4 qualifications in provider-based learning increased significantly between 2004 and 2005. This contrasts with a relatively lower increase for those in level 5 to 7 diplomas and certificates and a slight fall in those enrolled in bachelors qualifications. From 2001 to 2005, the relative growth in the number of learners in level 4 qualifications in provider-based learning was 10 times greater than for those in bachelors qualifications. Over the same period, learners in level 5 to 7 certificate and diploma qualifications increased slightly more than for bachelors qualifications.

The number of learners in workplace learning, industry training and Modern Apprenticeships increased very significantly from 2004 to 2005. Between 2000 and 2005, the numbers of learners in the workplace increased twice as fast as those in provider-based tertiary education. This is in part due to the increased focus by industry and government on skills development and productivity growth in the workplace. Also, the success of the Modern Apprenticeships scheme, and its popularity with industry and young people, is reflected in the significant growth in participation.

Bachelors-Level Qualifications

The number of domestic students enrolled in bachelors-level study decreased slightly from 2004 to 2005, for the second consecutive year, after many years of steady growth. The decrease was mainly driven by a decreased participation rate of older students studying at bachelors level.

The number of domestic students completing bachelors degrees decreased from 2004 to 2005 as a result of a small drop in the completion rate. An estimated 41 percent of domestic students who started a bachelors degree in 2001 had completed after five years, compared with 42 percent for those who started in 2000. Asian and European domestic students had the highest rates of five-year completion of bachelors degrees, while Pasifika students had the lowest rates.

While international students enrolled in bachelors study continue to make up a growing proportion of bachelors-level students, the growth in international students enrolled at bachelors-level study slowed during 2005. International students completed bachelors degrees within five years at a higher rate than domestic students, with 48 percent of international students who started a bachelors degree during 2001 having completed after five years.

Postgraduate Qualifications

The number of domestic students enrolled in postgraduate study increased between 2004 and 2005, continuing the steady growth in the number of postgraduate students over the last 10 years. The increase was driven by increased participation in postgraduate certificate and doctorate study.

The number of domestic students completing postgraduate qualifications also increased between 2004 and 2005. There was a marked difference in the five-year completion rates of domestic students in the different postgraduate qualifications, largely reflecting the duration and the nature of the study for each of these qualifications. Domestic students starting a postgraduate certificate or a bachelors degree with honours in 2001 had the highest five-year completion rates.

After 10 years of strong growth, the number of international students enrolled in postgraduate study declined from 2004 to 2005. The largest drop was in students studying for postgraduate diplomas. New Zealand has one of the highest proportions in the OECD of foreign students enrolled at postgraduate level. International students generally have higher rates of qualification completion than their domestic counterparts.

Student Support

In 2005, the number of student loan borrowers fell for the first time since the Student Loan Scheme was introduced in 1992. But, students borrowed more, on average, in 2005 than in 2004.

Higher tuition subsidy rates for the year ending June 2006 led to an increase in government's total financial support for students participating in tertiary education. Both the drop in the equivalent full-time student count and the greater proportion of students enrolling in courses that attract a lower per student funding rate were more than offset by the increase in the tuition subsidy base rates.

Uptake of student allowances in 2005 fell slightly on the previous year, in spite of the new parental income limits introduced in 2005 that were intended to enable larger numbers of students to qualify. This may reflect an increased choice of shorter, or part-time, vocational courses that do not attract student allowances.

Research Contribution

The research performance of the tertiary sector improved in several areas in 2005. In the area of research training, enrolments in doctoral degrees continued their rising trend in 2005. The number of people completing a doctorate of philosophy also rose in 2005, but at a slower rate than in previous years. The research contract income earned by the universities per academic staff member rose in real terms between 2004 and 2005. In addition, the share of the funding won by the universities from contestible funds in Vote Research, Science and Technology increased between 2002 and 2004.

A study by the Ministry of Research, Science and Technology of indexed research publications by university authors, between 1997 and 2003, showed that total research publications produced by researchers in universities increased over the period, resulting in a greater share of New Zealand-authored papers originating from universities. Despite the rise in total research publications, a faster rise in the number of academic staff resulted in a decline in research productivity – measured by publications per full-time equivalent academic staff member - between 1999 and 2003.

Sector Capability

The collective financial performance of the 33 tertiary education institutions was moderately strong during 2005. Liquidity and cash flow were both above the benchmark set for prudent operation of a tertiary education institution.

However, when compared to the performance between 2002 and 2004, performance in 2005 fell as the operating environment changed. The aggregate operating surplus fell to 2.3 percent of revenue – below the benchmark of three percent for the first time since 2000. At the same time, the indicators of liquidity and cash flow both worsened.

In large part, this decline in financial performance reflected factors such as the reduction in international student enrolments, changes to the funding of community education and the slowdown in the growth of enrolments in the wānanga.

While aggregate financial performance was moderately strong, there was considerable variation among the tertiary education institutions, with some recording a very strong performance, while nine institutions had an operating deficit in 2005, compared with six in 2004 and none in 2003.

Overall, the universities performed more strongly than the other sub-sectors. They experienced only a relatively small decline in international students, their income was more diversified than that of the other sub-sectors and they have had only relatively small community programmes, so their performance was not especially affected by the changes in funding of these programmes. The universities' collective surplus – 3.2 percent of revenue – was above the benchmark.

By contrast, the polytechnics experienced a fall in income as international enrolments dropped and, as a result of community education funding changes, their combined operating surplus was 1.6 percent of revenue, while five polytechnics recorded an operating deficit.

The size of the workforce in public tertiary education institutions remained stable in 2005 compared to 2004.

A fall in academic staffing at universities in 2005 was offset by an increase in non-academic staff. While the number of students at universities also fell in terms of full-time equivalent students, the student per academic staff ratio increased slightly in 2005.

Staffing and student numbers fell at wānanga in 2005 with a small decrease in the student per academic staff ratio. At institutes of technology and polytechnics, staffing levels remained stable in 2005 while the student per academic staff ratio fell due to a decline in equivalent full-time students.

The number of staff eligible for research funding from the Performance-Based Research Fund increased from 2003 to 2006 and the average age of the eligible researchers also increased in 2006.

Total expenditure on personnel for public tertiary education institutions increased in 2005, while personnel costs declined slightly as a percentage of total expenditure.

Investing in Knowledge and Skills

Total government spending on tertiary education increased in the year ended June 2006. Expenditure on tertiary education, including operating and capital expenditure, was $4,046 million in 2006. As a percentage of gross domestic product, both total expenditure and operating expenditure increased in 2006. Total tertiary education expenditure accounted for 2.6 percent of gross domestic product while operating expenditure accounted for 1.9 percent.

The number of equivalent full-time student places funded by government decreased between 2004 and 2005. This is the first decrease in recent years and comes after a slowdown in growth in 2004. Despite the latest decrease in student numbers, government spending on tuition subsidies continued to increase in 2005, due to an increase in the base funding rates.

In 2005, the average domestic fee per equivalent full-time student increased for the second consecutive year, following two years of decreases. The latest increase reflected the transition from the fee stabilisation scheme to policies that will allow some modest fee increases. It also reflects a move away from enrolments in low or zero fee courses. There was a slowdown in international student enrolments in 2005 and, as a result, total international fees revenue decreased from 2004 to 2005.

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