2 May 2005 Media Statement

Strong economy leads to fewer tertiary enrolments

Indications are that the stronger-than-expected economy has led to fewer enrolments in tertiary education, and fewer people accessing student allowances, Education Minister Trevor Mallard said today.

“As a result of the stronger economy and strong employment market we believe that more students have moved straight from school to work instead of enrolling in tertiary education. There has also been a shift from full-time to part-time study.

“The strong economy also means parents are earning more and so fewer students are eligible for allowances which are based on their parents’ incomes,” Trevor Mallard said.

“We are still analysing the reasons for these trends but their effects are quite clear - there are fewer people eligible for allowances than we had expected. Well-paid part-time work can sometimes act as a disincentive to students to take up an allowance.

“Between mid-May and early-June the Ministry of Education will receive information from tertiary providers on tertiary student enrolments as at the end of April 2005 (this is called the April Single Data Return).

“This will enable the ministry to undertake a more detailed analysis and report to me on the issue."

In Budget 2004, the government acknowledged that parent's incomes were higher and so it increased both the upper and lower parental income limits for allowances for single students under 25 to increase eligibility.

The lower limit increased from $28,080 to $33,696 and the upper limit increased from $50,752 to $62,148. The government also agreed to increase these thresholds annually in line with inflation - so these thresholds lifted further on April 1 this year.

The number of students receiving student allowances have been falling steadily since 2001 and the changes were intended to benefit around 36,000 students (around 21,000 of which were expected to be newly eligible for student allowances).

“However it appears that despite this move, the uptake of student allowances in 2005 is lower than was forecast at the time. The forecast was based on the economic conditions and assumptions at the time and on predictions of student behaviour. Clearly forecasting by its nature, is not an exact science,” Trevor Mallard said.

“Full-time enrolments in 2005 now look like they will be 11 per cent below what we expected when we put the changes to allowances together in 2003/04,” Trevor Mallard said.

“I expect that student allowances numbers will continue to be influenced by the factors I have mentioned - the benefits of tertiary education relative to immediate employment opportunities, the relative attractiveness of full-time study, the eligibility rules set by the government and students' understanding of these.

“Our current forecast is that numbers of student allowances recipients will increase by 10,000 between 2004 and 2009. These forecasts are regularly updated in the light of the latest information as part of the government's fiscal management process," Trevor Mallard said.

Responding to other comments on allowances made today, Trevor Mallard confirmed the uptake of allowances had fallen over the last few years.

"This is because the parental income thresholds for student allowances were fixed in 1992 and weren't raised between then and the start of 2005. This is precisely why our government decided to raise the parental income threshold in Budget 2004 to combat this problem. The higher threshold took effect from this year."

Additional information

When the policy was decided, based on BEFU 2004, the forecast for 2005 was 237,554 full-time enrolments, and the proportion of full-timers on all enrolments 45.6 per cent.

Based on the 2004 actual out-turn, the current forecast is 211,019 full-time enrolments [26,535 or 11.2 per cent less than in BEFU 2004] and the proportion of full-timers on all enrolments is forecast to be 40.3 per cent.

Click to view a report to ministers on the issue – 465Kb PDF File.

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