1. Session G: Global Financial Crisis – What does it mean for Higher Education?

2. Impact of the Global Financial Crisis on New Zealand Key financial indicators – GDP growth, inflation, government operating balance (from Pre-election Economic and Fiscal update) Since 1 July 2008 value of NZ$ against US$ has declined by 26.8%, from NZ$1=US$.7619 to NZ$1=US$.5577 NZSX 8% decline in value in year to end September cf 12% decline in Australian SX Property investments now also performing poorly However, NZ banking system generally sound with few “sub-prime” features

3. Immediate impact of financial crisis on New Zealand universities Significantly higher than predicted inflation impacting on universities – CPI adjustment to university funding for 2008/2009 FY was 2.6% - inflation at 5% for year to September and university costs increases at 1.6 times CPI because 65% of university costs are salaries which have been increasing faster than CPI Decline in earnings from and value of investments may affect scholarships, endowment funds, capital works programmes General revision of budgets to accommodate decline in investment income

4. Medium term Possible impact on international student enrolments (e.g., declining value of parental investments) but NZ may benefit from (un)affordability of US, UK universities Higher unemployment may increase domestic student enrolments (but only 3% tolerance above negotiated funding levels) – this may require renegotiation of funding policy with government

5. Longer term Pressure on funding available for government investment means university funding may decline even further in real terms and discretionary funding particularly contestable research funding may be restricted even further Restrictions on university funding may lead to higher student:staff ratios and increasingly dated teaching and research infrastructure Pressure on universities to raise student fees to compensate for restricted government funding – may require renegotiation of fee maxima policy with government

6. Longer term Losses on superannuation investments may lead to staff postponing retirement – assists with retaining experienced high performers but may cause problems with transiting those who should retire out of the workforce Decline in availability of casual employment for students may lead to increased borrowing from student loan scheme for living expenses pushing up debt levels and time taken to repay student loans