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New Zealand higher education has bounced back from the brink of a sector-wide deficit, with seven of the eight institutions posting surpluses in 2024 ¨C up from just two a couple of years earlier.

But the recovery may be short-lived, after the government refused to extend a funding lifeline credited with averting widescale university retrenchments.

Annual reports published by the eight institutions reveal a collective NZ$204 million (?91 million) increase in revenue, mainly thanks to a NZ$152 million rise in government grants.

The extra public funding, combined with unexpectedly high tuition fee income, more than compensated for a NZ$172 million blowout in expenses driven by a NZ$159 million increase in salary bills and operating costs.

The sector finished the year with a 3 per cent financial buffer, up from 2 per cent the previous year. Lincoln 51¹ú²úÊÓƵ, the only institution to record a deficit, posted a NZ$1 million shortfall and would have been in surplus but for the cost of demolishing a superseded 1970s building.

However, the key driver of the sector¡¯s increased government funding ¨C an emergency 4 per cent boost to teaching subsidies announced in 2023 ¨C expires at the end of this year. The government opted not to extend it in the May budget, instead increasing teaching grants in a select bunch of health, education and STEM disciplines.

Universities New Zealand chief executive Chris Whelan said the budget¡¯s net effect would be a slender 0.8 per cent increase in revenue. ¡°This remains behind inflation and will fall unevenly across the individual universities,¡± he said.

¡°Much of the real increase was to STEM subjects and teacher training, with a real decrease in funding to all other areas. Universities that have a larger proportion of students across humanities, social sciences and business disciplines will face greater pressure.¡±

Whelan said the government had been ¡°very clear¡± that it did not intend to increase funding if enrolments exceeded forecasts. ¡°We expect things to become a lot tighter in 2026.¡±

The financial accounts show that tuition fee revenue rose overall by NZ$113 million, driven by an extra NZ$75 million from foreign students. With New Zealand¡¯s government keen to expand international enrolments ¨C unlike its counterparts in Canberra, London and Ottawa ¨C insiders expect this revenue stream to continue growing.

But a source highlighted the risk of overdependence on foreign students¡¯ fees, which constituted 11 per cent of the sector¡¯s overall revenue last year, compared to about 29 per cent in Australia.

The accounts also show that New Zealand universities¡¯ ¡°parent¡± entities, which conduct the core teaching and research activities, posted much smaller surpluses than their ¡°consolidated¡± entities including their commercial subsidiaries.

This suggests that universities are relying increasingly on income from peripheral businesses like conference centres, caf¨¦s and consulting arms. ¡°When it comes to the core business of teaching and research, it¡¯s still a bit brittle,¡± said the source, who asked not to be named. ¡°It¡¯s a little on the marginal side ¨C a sort of inch-by-inch recovery.¡±

While educators are awaiting the outcomes of a university system review, headed by former chief science adviser Peter Gluckman, insiders doubt it will produce additional net funding. The government has so far overlooked some of the more expensive recommendations of the science system review, which was also headed by Gluckman.

The university review¡¯s final report was due with the government in February, but has not yet been released publicly.

john.ross@timeshighereducation.com