Varsity investment generates higher growth rate

The Government must invest more in New Zealand’s universities to generate higher levels of growth, employment and private consumption, according to the New Zealand Institute for Economic Research (NZIER).

It found that an additional investment of $200 million in the next five years (at $40 million a year) would result in a permanent increase in GDP of $370 million per year (0.12%) by 2025.

The additional investment would return 1.85 times the value (of the money invested) in GDP terms annually within 15 years, it said.

Private consumption would also rise by 0.029% ($44 million per year).

Universities New Zealand, a body that collectively represents the country’s universities, commissioned NZIER to study the effect that additional investment of $200 million would have on the education system and the economy and recommend suitable measures for overall improvement.

The Report titled, The Economic Value of University Investment, said such investment was likely to witness short-term contraction in the economy as more people are taken out of the workforce to pursue university education but in the long-term effects of high employment and growth should be held in perspective.

“The Government invests more than $1 billion a year in our universities and a similar amount in financial support for university students. Regardless of the economic environment (recession or prosperity), it is important to determine the value that New Zealand taxpayers receive from investment in universities,” the Report said.

Indian Newslink understands that this was the first Report of its kind undertaken in New Zealand and that its conclusions were similar to those of KPMG EconTech for Universities Australia two years ago.

The Australian government had responded to that report with markedly increased levels of investment in their universities.

Funding Sources

According to NZIER, the New Zealand Government would be able to provide additional funding ($200 million over five years) through taxation revenue, borrowing and transferring investment from lower level (sub-degree levels 1-3) tertiary provision (see graph).

A revenue-neutral transfer of funding from levels 1-3 qualifications to degree level study showed a permanent boost in GDP of 0.15% ($440 million per year) and an increase in private consumption of 0.23% ($340 million per year) by 2025, the Report said.

Based on the findings of other studies, the NZIER Report said higher skills and qualifications led to higher levels of productivity

Other studies have demonstrated that increasing skills and qualifications have a greater impact on productivity when they are combined with capital investment, research and more effective technologies.

NZIER based its findings on the assumption that Research generates new technologies that lead to productivity benefits across a range of industries.

Research critical

The Survey said universities accounted for a majority of research work and hence it made sense to increase their funding.

“Universities also employ half of the country’s research staff and produce 50% of public patents. It is the application just as much as the discovery that drives researchers. All of New Zealand’s universities have commercialisation arms which focus on connecting research expertise to business users,” it said.

New Zealand’s universities had organised a number of programmes last year in conjunction with the Tertiary Commission and Business NZ to foster better ties with businesses for research.

These programmes would continue this year.

Vice Chancellors’ Committee Chair and AUT University Vice-Chancellor Derek McCormick said the NZIER Study focused on the real issues and agreed with its finding that 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 resulting from such decline,” he said.

Mr McCormick said the NZIER report provided further evidence that university education and research were central to New Zealand’s long-term growth, which in turn would help the country to bridge the economic disparity with Australia.

“Permanent increases to our GDP of the magnitude mentioned in the Report could be a cornerstone to the Government’s goal of closing the gap with Australia by 2025,” he said.

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