Universities Key To Economic Recovery And Growth

Media Release 24 April 2009

Universities Key To Economic Recovery And Growth

Increases in skills, productivity, exports and GDP would result from increased public investment in universities, an Australian economic study has shown.

The representative body for the New Zealand university system, the New Zealand Vice-Chancellors’ Committee, says the study documents how a boost in university investment would drive both economic recovery and growth.

Commissioned by Universities Australia, the KPMG Econtech study provides evidence that implementing the funding recommendations from the Bradley review of higher education in that country would increase real Australian GDP by an average of $1.6 billion annually over the next decade.

NZVCC chair Professor Roger Field says the study findings back the message universities here are also putting before government; the current economic recession is precisely the time to invest in universities’ key role in increasing professional skills, innovation and research output.

“The Australian study points out that investing in universities is budget friendly because students repay the taxpayer through loan schemes, graduates pay higher taxes than non-graduates and the wider economy is stimulated and is more productive.”

Assessing the economic impact of the funding recommendations in the Bradley review, the study confirms that putting all economic benefits and costs together delivers a real rate of return of between 14 and 15 per cent, well above the benchmark rates used to judge good public policy, which are typically 6 to 7 per cent.

After drawing on international research on the economic payoff from universities’ education and research functions, the study characterised the real rates of return from university education as being in the range of 15 per cent or more and in the range of 20 per cent or more for university research.

“These findings underline the New Zealand universities’ case for counter-cyclical investment. The best way to ensure the country can climb out of the recession is to build our workforce skills base and innovation system. New Zealand will then have the necessary human resources to seize the economic opportunities when the global economy starts to improve,” Professor Field says.

“The Australian study tells us that the net upfront cost of investing in universities is modest and the downstream payoff is unusually large in terms of annual GDP growth. It is not a question of whether New Zealand can afford right now to put more financial resources into its universities, the issue is whether it can afford not to. If it doesn’t, five years from now we could find that New Zealand has missed the boat in the global economic upswing.”

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