Public funding for tertiary education

IBISWorld forecasts that public funding for tertiary education will swell by 0.8% in 2025-26, to total $5.14 billion. Demand for tertiary education among New Zealanders is typically counter-cyclical, rising in times of deteriorating economic conditions. This situation encourages more New Zealanders to enrol in tertiary education and training courses, like apprenticeships, which delays their entry into the workforce and allows them to circumvent the poor hiring conditions of the time. The pandemic-induced drop in international student enrolment, who pay higher fees, strained tertiary institutions and required additional funding from government departments.

Over the five years through the end of 2025-26, the Annual Maximum Fee Movement (AMFM) imposed by the Central Government has fallen, pushing up public funding for tertiary education. The AMFM is a rate set by the Central Government that represents the maximum percentage by which tertiary education providers can hike their fees. Up to 2015, the AMFM was set at 4.0% each year but was reduced to 3.0% in 2016 following public concerns regarding the affordability of tertiary education. The AMFM was further reduced to 2.0% in 2017 and remained at this level for 2018 through 2020. In 2021, the AMFM was reduced significantly to 1.1% to assist the affordability of tertiary education during the pandemic. The lower AMFM has restricted tertiary education's revenue from student fees. As a result, the government has had to raise the funding it provides to subsidise universities. The AMFM rate increased to 2.8% in 2024 before spiking in 2025 to 6.0% providing tertiary education providers with greater flexibility to manage cost rises.

Unemployment in New Zealand has been trending upwards over the past five years, growing from 4.2% in March 2020 to 5.1% in March 2025 (most recent available data). This change has pushed more secondary students into tertiary education as they forego directly entering the workforce. This trend has caused government funding for education courses to strengthen, resulting in a 7.9% annualised growth in public funding for tertiary education over the five years through the end of 2025-26.