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7 – Education

This section discusses the availability of data for measuring change in education output and inputs, along with the issues that these data sources present for those interested in measuring change over time in health care productivity. Separate sub-sections are devoted to early childhood education, schooling, tertiary education, and other education, addressing output quantity, output quality, and output weights for each sub-sector. These are followed by separate sub-sections covering labour inputs, capital inputs, and intermediate consumption. Before launching into these descriptions, here follows a summary of concepts and a description of the existing analyses of education output (along with critiques of their sources and methods).

7.1 The education system in New Zealand

This section describes the education system in New Zealand to help the reader understand the scoping issues and the general context for any ensuing productivity measure. Education in New Zealand ranges from optional early childhood education for children under six, through compulsory schooling for those aged six to sixteen, to post-school vocational training and tertiary education up to the doctoral level. It is delivered by a combination of public and private institutions. Because conceptual issues and data sources are specific to each educational sector, this section separately presents detailed information for each level. See sections 7.2.3 early childhood education, 7.2.4 school, 7.2.5 tertiary education, and 7.2.6 other education.

Possibly the single most important question to be answered before work on government productivity could move forward is that of scope. Economic statistics published by Statistics NZ, such as Gross Domestic Product and Productivity, are produced on an industry basis, without regard to the finance of those industries. Educational output estimates consistent with the System of National Accounts are required to expand Statistics NZ’s existing suite of industry-based official productivity estimates. Users may also wish to answer questions about productivity with regard to government expenditure on and/or delivery of educational services. The selected scope has implications for data requirements, compilation methods, and coverage. Refer to section 5.2 for discussion of scope as it relates more broadly to government sector productivity measurement.

The distinction between public and private educational institutions is less clear-cut than might be expected at first glance, and must be determined by examining ownership and control of the provider. Additionally, the Ministry of Education’s understanding of the question may differ from that of Statistics NZ. The table below describes the ownership possibilities of each type of educational institution, as recorded by the Ministry of Education.


Table 5. Ownership of NZ educational institutions


Community-based ECE services

Owned by an incorporated society
Owned by a charitable trust
Owned by a statutory trust
Owned by a community trust
Owned by a government department
Owned by a health board
Owned by a local authority
Owned by a trading enterprise
Owned by a public education institution
Owned by the crown

Private ECE Services

Privately owned by a sole teacher
Privately owned by a company
Privately owned by a partnership
Owned by a private trust
Owned by a state owned enterprise



State: Not Integrated
State: Integrated


Private: Fully Registered
Provisionally Registered

Other Vote Education (e.g. special education)


Public Tertiary Institution
Privately owned
Established by Act
Owned by a trust
Owned by an incorporated society
Corporate Institutions (including Government agencies)

Source: MOE


What should be considered government education for the purposes of productivity analysis? An industry-based approach requires assigning a provider to either the government or private sector. This is consistent with the System of National Accounts and the existing Statistics NZ productivity estimates. Potential definitions of the boundary between government and non-government are explained below, with inclusions at each level of

Government delivery

  • None of the ECE providers are owned and operated by government entities, except incidentally as a service to their staff (eg university crèches)
  • Only state schools, including the Correspondence School, are fully owned and operated by the state. (State integrated schools privately own their capital.)
  • Public universities , polytechs, and wananga are fully owned and operated by the state
  • Specialised public ‘other tertiary education providers’, such as the School of Dance and Drama, are fully owned and operated by the state. Educational arms of government bodies, such as the Police Academy, are also fully owned and operated by the state.

Government control

This is a difficult consideration to measure precisely. All ECE providers are subject to some amount of government control through the licensing and funding regimes. All schools are subject to some amount of government control through the licensing and funding regimes, and the requirement for compulsory schooling for children aged 6–16 years. All tertiary providers are subject to some amount of government control through the licensing and NZQA registration of qualifications.

Recommendation E1

Consideration must be given to consistently applying definitions of government and private education across all levels. The definition selected should fit the question that government productivity measures are intended to answer.

From a policy perspective, users may be interested in understanding the productivity associated with government financing of educational institutions or services. Government funding ranges from full funding of state schools, to a few hundred dollars per pupil at private schools. A clear threshold would be required in defining a scope based on government funding.

Government funding

  • All ECE services described receive funding from the government. The proportion of service covered by the Ministry of Education varies by service type, as shown in table 16.
  • State schools are ‘fully funded’ by the Ministry of Education, although this only makes up an average of 86 percent of their income – the rest is composed of local donations (see table 6). Integrated schools are partially funded by the Ministry (salaries and operation), and private schools receive per-student stipends from the government (see table 7).
  • Government funded tertiary education includes all public universities, polytechs, and wananga, as well as the registered private tertiary institutions that receive state funding for particular programmes. They might exclude the unfunded portion of educational services delivered by state tertiary providers.
  • In addition to the specialised public ‘other tertiary education providers’ and government tertiary providers, the government funds industry and targeted training programs delivered in both classroom and workplace settings.

Treatment of government funding

If the selected scope is government-funded education, the proportion of productivity allocated to government should be equal to the proportion of expenditure provided by government. Government only provides 82-88% of funds to state and state integrated schools, with the rest being locally raised through donations and fundraising . Care must be taken in treating this as uniformly and transparently as possible, consistent with the scope of the productivity estimates. Refer to section 5.4.3 for more general discussion of this concept.


Table 6. Total Revenue of State and State Integrated Schools by category

 Table, Total Revenue of State and State Integrated Schools by category.


A second consideration in the schooling sector for the scope of government-funded education is inclusion of the proportion of private school education that is paid by government, identified in table 8.


Table 7. Operational Funding of Private Schools by category

table 7, operational funding of private schools by category


Recommendation E2

Most education involves a certain degree of co-financing through fees and donations, and for integrated schools through privately owned capital. Care is required to treat this consistently in accordance with the principles laid out in this report. 

Public funding can also be specific to the recipient of the educational services. International students are generally not eligible for public funding, even if they attend a public educational institution. Conversely, state educational funding for students with special needs can be used to acquire appropriate special education at a public or private school.

At this stage, the question of which educational activities will be in the scope of potential productivity estimates has yet to be decided. This report attempts to cover the broadest possible needs, with sufficient disaggregation to also answer more specific questions. Selected potential definitions of scope include:

  • Publicly funded and delivered educational services (top left of box below)
  • Publicly funded educational services, regardless of delivery (first two columns below)
  • Publicly delivered educational services, regardless of funding (first row below)
  • All educational services divided into publicly and privately funded groups.


Table 8. Funding and delivery matrix of NZ educational system








State schoolsCorrespondence SchoolUniversitiesPolytechnicsWananga Government agencies


Fee-paying International students


Special schools

Integrated Schools




Community-based ECE/Private SchoolsRegistered private tertiary/Industry training orgs

Private ECERegistered private tertiary


7.2 Education output top

7.2.1 Summary of concepts

As for health care, the basic framework for measuring education output is set out in SNA 1993, which encourages direct measurement of the actual volume amounts of goods and services produced and/or consumed, but acknowledges that the use of deflated expenditure on inputs is an option; that is, the ‘output=inputs’ method. The other main publications available provide further detail on implementation. (See section 5.1 for detailed discussion.) The conceptually pure measure emerging from this literature, along with real world limitations on achieving it, is summarised in table 5.

Individual educational services, including preparing and delivering lessons, giving and marking examinations, as well as general supervision and counselling, can be characterised as ‘teaching services’ . The goal of measurement is to accurately capture this output .

Output quantity

Teaching services are provided in groups of varying sizes, which means that an hour of a teacher’s time can provide varying amounts of individual educational benefit to students. To satisfy the National Accounts framework, which measures both what is received and what is produced, the Handbook on price and volume measures in the National Accounts (Eurostat 2001, paragraph 4.12) states that the appropriate output measure of education is the sum of the individual educational benefit provided to each pupil. Hence, the individual educational benefit should be expressed as an hour of teaching received by a student at a particular level and programme type (‘pupil-hours’). Pupil-hours or full-time student equivalents (FTSEs) are superior to headcounts, because they capture differing levels of educational intensity in areas where less-than-full time participation is common.

In tertiary education, lessons are both fewer than they are at lower levels and less important relative to student efforts outside of class (ie outside of the National Accounts ‘production boundary’ of the education provider). Additionally, students proceed through programmes at varying levels of intensity. This makes classroom student-hours a less relevant measure of output. Student numbers or full-time equivalents are often used as a direct volume measure for tertiary education output, but they cannot capture changes in educational quality or intensity. Degree completion is also a problematic measure because of the difficulty with timing production, as well as the comparability of degrees over time.

For that reason, international thinking on the topic is that credit completion, if available, is a better proxy for output at the tertiary level. It more accurately indicates the intensity of the student’s attendance, and can be seen as an indirect indication of the quantity of teaching services, if we assume a correlation between student workload and quantity of teaching.

Output quality

In addition to measuring the quantity of educational output, users may be interested in controlling for changes in education over time. This is known as ‘quality adjustment’. The main tool for implicitly capturing change in quality is differentiating between different types of quantity in an output measure: in education, it is necessary to differentiate between different types of schooling (at a minimum between primary, secondary, tertiary, and special). The conceptual criterion is that the categories should be homogenous; however, it is recognised that this may not be practically attainable.

Cautionary note

‘Quality’ in this context does not necessarily denote that something is better or worse, but that it has different defining characteristics. For example, special education is different from traditional primary schooling, and hence should be treated separately. See section 5.3.1 for more information.

Other techniques for explicitly incorporating quality include: (1) adjusting the quantity measures for quality change (eg adjusting by mean standardised test scores on the assumption that change in score represents change in the quality of educational output); and (2) defining the quantity measure of output in terms of quality (eg measuring only courses passed).

There is currently no consensus on how to incorporate into an output quantity measure the other aspects of quality that are not, or cannot be, picked up by differentiation, for a number of reasons. The main types of quality adjustment for education are considered to be:

  • exam scores
  • school inspection results
  • class size10 (favoured by Italy)
  • attendance rates (currently used in the UK).

Grades, exam scores, credits, and the like, depend greatly on student efforts, and are not indicators of change in educational services as such. However, if the assumption is made that student effort is in constant proportion to teaching services, student attainment can be taken as a proxy for the volume of teaching services of a constant quality.11


Table 9. Aspects of conceptually pure method of measuring changes in education output over time, with limitations

Aspect of conceptually pure method


A. Education output should be defined from the perspective of the consumer: a unit of output covers a course of education at a given level, regardless of the intensity with which a student progresses through it or whether it is delivered by a public or private provider.

A.1 Typically, countries' education information systems are uneven in their depth of information. While an ideal measure would feature student numbers attainment-adjusted to represent educational output of a constant quality for each level12, most areas will only have data sufficient for pupil-hours or full-time student equivalents (FSTE) without regard for the success of education delivered. Some sectors will only be able to consistently provide student numbers.

A.2 Even where information systems provide such depth of information, there are significant conceptual issues that need to be addressed for defining the unit of output for parts of the education system. While it is relatively simple to define the output of a mainstream primary school, this is not the case for all types of education; for example, what is a course of education in a special school where each student has different needs and abilities; what is the output of tertiary sector research?

A.3 This concept cuts across the usual National Accounts methods, which distinguishes between the value-added provided by different parts of the economy. In the case of education, a child accumulates educational benefit as they move through private sector early childhood education providers to public sector primary and secondary education providers – unpicking the relative contributions of each of these providers (their individual value-added) is a difficult task.

B. Any measure should be as comprehensive as possible, covering all of the different types of education provided by the different parts of the system.

B.1 Many countries have good information on primary and secondary education, but relatively less information on early childhood, special, and tertiary education that is easily accessible.

C. The relative importance of different types of education should be given by the marginal valuation.

C.1 There is little conceptual basis for judging relative importance in the absence of a competitive market that allows for clearing or marginal prices:(i) average costs provide information from the producer perspective and are generally easily available (hence, this is what is recommended in the literature).(ii) revealed preference studies could provide information from the consumer perspective.

D. Change in education output can occur because of either a change in the number of students and/or a change in the quality of education. Some of the quality change can be picked up by differentiating between different types of education. Other types of quality can be picked up by examining the contribution of education to outcome.

D.1 Differentiation will not pick up quality change within levels/types of education.

D.2 Quality is multi-dimensional, and the choice of which dimension or dimensions are relevant depends on the type of education. For example, for alternative education units, the main dimension of quality may be improved attendance and engagement with education, whereas for mainstream secondary schools the attainment of higher qualifications may be more relevant.

D.3 There is no agreed method for combining two or more quality dimensions for treatments where this is appropriate: how relatively important is exam scores against, say, class size?

D.4 Distinguishing the role played by an education system from other factors affecting education outcomes (engaged parents, increased student effort, etc) is difficult and needs further work.


7.2.2 Existing Analyses top

This section explains in detail Statistics NZ’s current measure of educational output in the National Accounts. This is compiled so that the National Accounts can comprehensively cover the total economy. However, Statistics NZ does not publish a separate education output index.

Classification and Population

Table 10 below describes the scope of Statistics NZ’s education output measure in the National Accounts in terms of various classifications, and the concordance between them. The following classifications are shown: Australia New Zealand Working Industry (ANZWI), Australia New Zealand Standard Industrial Classification 1996 (ANZSIC96), Australia New Zealand Standard Industrial Classification 2006 (ANZSIC06), and National Accounts Working Industry 2006. The working industry classifications are used within Statistics NZ for low-level calculations, but are not published.


Table 10. Scope of National Accounts Education Industry by Classification








Pre-school education




8421 primary8424 special8432 combined

Primary Education and
Special Schools

8021 primary 8024 special 8023 combined




Secondary Education

8022 secondary


8431 universities8432 polytechnicss

Post-School Education

8102 universities 8101 polytechnics




Other Education

8211 sports & rec instruction8212 arts education8219 other education, nec8220 ed support services



In addition to industry classification, each kind of activity unit (KAU) is assigned an institutional sector and market/non-market status. The private market group is relatively small and includes: English language providers, driving schools, corporate trainers, some tertiary providers. The private non-market part includes: private schools and other non-profit type providers.

Value added for public education is calculated at the 4-digit working industry level for Public Early Childhood education (N011), Public Primary and Special Education (N012), Public Secondary education (N013), Public Post-school Education (N014), and Public Other education (N015).

Private sector education value added is derived for the total industry group. Private market (1M) ECE, primary, secondary education providers, as well as all (market and non-market) private tertiary education providers are grouped together with other (non-tertiary) education providers as ‘N01M’. Private non-market ECE and school education providers are grouped together with other (ie non-tertiary) private education providers as ‘N01N’.


Table 11. Current National Accounts treatment of public and private education


Public (2N)

Private non-market (1N)

Private market (1M)


the 33 kindergarten
associations considered
(by GIA) to be Government entities

Non-profit ECE (352 units)

All other ECE? (240 units)


State and integrated
primary, combined
primary/secondary and special schools(2,146 units)

Private primary schools,
combined primary/secondary
and educational trusts
(30 units)

17 units


State and integrated
secondary schools
(315 units)

Private secondary schools
and educational trusts
(23 units)

5 units


8 universities
3 wananga
20 polytechs


Private training establishments
(98 units)


NZ Drama School and NZ School of Dance
(23 units)

Private tertiary institutions,
ITOs and educational trusts
(185 units)

English language providers
driving schools
corporate trainers etc
(1,083 units)


Detailed information by series

New Zealand National Accounts for education are produced on the following basis


Current price series

Chain-volume series


• Production
• Expenditure

• Production
• Expenditure


• Expenditure

• Production
• Expenditure

Production (Gross output less intermediate consumption)

Constant price quarterly value added is calculated at the 4-digit working industry level for public education and the total private market education sector (all levels aggregated to N01M) using the interpolation of annual values without quarterly indicators. The estimated value added for series are chained to derive the quarterly total (private and public) education value added. Because educational services are delivered in annual units, quarterly changes in output or value added are estimated annually and allocated across the four quarters.

Constant price annual value added for education is extrapolated with a volume index based on student enrolments in private and public schools provided by the Ministry of Education.

Current price value added is available at the 4-digit working industry level for public education and private education. The data for public education comes via the Crown Financial Information System (CFIS), annual reports or directly from education providers. The private data comes from the Annual Enterprise Survey (AES).

The roll numbers used to represent educational output are as follows:

  • ECE: Total number of enrolments in licensed kindergarten services from the Annual Early Childhood Education Child and Staff return, which represents an enrolment snapshot. These data are available back to 1990.
  • School: Total number of enrolments by school type (primary and secondary), including international fee-paying students. These data are available back to 1991.
  • Tertiary: Total Domestic FTSE for universities, polytechs, and teachers colleges (wanangas are excluded), with no separation by level or subject of study. This is available back to 2000 in its current form, and to 1994 by public/private.

Expenditure (private fce + government fce + inventory change +GFKF)

Current price private final consumption expenditure (annual & quarterly) on education is measured using market output for the education industry accounts for government education, and market and non-market sales for private education. The constant price private final consumption expenditure (annual & quarterly) series is deflated using the tuition and examinations sub-index of the CPI, which covers school tuition, university tuition, and a small weighting of ‘special interest courses’ including piano lessons. In both cases, the quarterly series is interpolated.

Current price government final consumption expenditure (annual) on education is estimated as the sum of costs less sales from Ministry of Education financial data and annual reports. Quarterly current prices (excluding sales) use funding payments made to schools and tertiary institutes as an indicator.

For the purposes of Constant price government final consumption expenditure

  • current price intermediate consumption (annual and quarterly) is deflated using the education sub-index of the PPI
  • current price annual sales are deflated using the education sub-index of the PPI and interpolated quarterly
  • current price compensation of employees is extrapolated by the output volume indicator (ie roll numbers) for annuals, and an employment indicator for quarterlies. Both indicators are sourced from Ministry of Education data.

Changes in inventory are sourced annually from the Ministry of Education. The book values are reflated using the education sub-index of the PPI for the current price series, and expressed in base-year average prices for the constant-price series.

Gross fixed capital formation is calculated from Ministry of Education financial data and annual reports, deflated for constant price series using the educational buildings sub-index of the CGPI. AES data are used for private units on an annual benchmark, or balanced year basis. These private data are used to attribute an appropriate proportion of the non-residential building total from the Quarterly Building Activity Survey (QBAS).

Treatment of fees and funding

School fees are treated:

  • as donations or transfers when paid by domestic students for government owned primary and secondary schools, and are not included in gross output for the education industry.
  • as sales when paid by foreign students, and therefore are included in gross output.

Government funding:

  • to state educational providers is treated as a current transfer.
  • to private non-market educational providers (1N) is also treated as a current transfer.
  • to private market education (1M) industries is considered social assistance benefits in kind (SABIK) and is treated as income (ie GOVTFUND variable is added to the OTHINC variable and so to gross output).

Suggested Improvements

Eurostat (2001) recommends an output indicator approach, where the indicators satisfy the following criteria:

  • covers all services provided;
  • weighted by the cost of each type of output in the base year;
  • as detailed as possible; and
  • quality adjusted.

There is room for improvement in the Statistics NZ output measure of education on each of these metrics, in light of the data sources detailed in this report. Specific recommendations will be made in the sections devoted to various levels of education.

International consensus holds that the ideal output measure for ECE is number of actual pupil-hours. The current output measure used by National Accounts falls short of this in two regards: breadth of coverage and use of headcounts rather than FTSEs. ECE data from the Ministry of Education is available from 1990. Starting in 1996, full-time student equivalents are available for a full range of provider type.

The internationally recommended optimal output measure for each level of schooling is number of pupils, attainment adjusted. Potential sources of attainment adjustment include: standardised test scores, proportion of students leaving school with a qualification, and proportion of students leaving school with a qualification of a certain standard (eg university entrance). Barring that, the recommended proxy is number of pupil-hours or full-time student equivalents. This measure may be further adjusted for attendance, if desired, as it is in the UK. These data are available from the Ministry of Education from 2000.

For reasons discussed in section 7.2, the internationally recommended output measure for tertiary education is number of completed credits by level (1–3, 4–7 non-degree, bachelor and postgraduate), separated into subject area where possible. Barring that, the recommended proxy is full-time student equivalents by level (1–3, 4–7 non-degree, bachelor and postgraduate), separated into subject area where possible. These data are available from the Ministry of Education from 2000.

Recommendation E3

Statistics NZ’s volume measures for education should be aligned as closely as is practicable with recommendations representing international best practice.

How does New Zealand’s education measure compare?

How far have countries progressed in moving away from the ‘output = inputs’ method? The following table summarises the findings of a 2006 OECD and Eurostat survey on compilation methods of National Accounts estimates of output for health and education services. For more detail see section 10.3.


Table 12. Summarised results of 2006 Eurostat and OECD surveys of methods for education services

Quality adjusted quantity measure

Austria, France, Hungary, Italy, Latvia, Lithuania, Malta, Spain, Sweden, UK

Quantity measure only, no quality adjustment

Australia, Belgium, Czech Republic, Finland, Germany, Greece, New Zealand


Canada, Denmark, Japan, Korea, Luxembourg, Switzerland, US

Source: OECD


7.2.3 Early Childhood Education top

This section describes delivery and funding of Early Childhood Education in New Zealand, in order to help the reader understand, for example, the scoping issues as well as the general context for any ensuing productivity measure. Some data are supplied for illustration. For detailed information on the data sources referred to in this section, see chapter 10.

ECE is education and care for infants and young children before they begin school. The International Standard Classification of Education defines pre-primary education as having the following principal characteristics: ‘Programmes at level 0, (pre-primary) are defined as the initial stage of organised instruction, and are designed primarily to introduce very young children to a school-type environment; ie to provide a bridge between the home and a school-based atmosphere. Upon completion of these programmes, children continue their education at level 1 (primary education)’ [UNESCO 1997, paragraph 37].

The majority of children in early childhood services in New Zealand are under five; however, children may attend early childhood services up to their sixth birthday, when schooling becomes compulsory. As of 1 July 2007, the Government pays for up to 20 hours per week of early childhood education and care through teacher-led services for three and four year old children. The government has agreed to extend this to include other licensed ECE services (ie Playcentre and Te Kohanga Reo) as of July 2010.

As laid out in section 7.2.1, the ideal output measure for ECE is number of actual pupil-hours. The current output measure used by National Accounts falls short of this in two regards: breadth of coverage and use of headcounts rather than FTSEs.

Currently, government-classified ECE output is limited to a subset of kindergartens, and the public/private distinction is decided on a case-by-case basis. This classification is currently under review, and it may be decided that no ECE providers are classified to the government sector. Non-kindergarten licensed ECE and all license-exempt ECE groups are excluded from the National Accounts output indicator. As of 2008, licensed kindergarten covered 23 percent of enrolments in licensed ECE and 21 percent of total ECE enrolments (ie including license-exempt).


Table 13. Enrolments in licensed and/or chartered early childhood education services by service type as at 1 July (1992 to 2008)

enrolments in licensed and or chartered early childhood education services by service type

ECE data from the Ministry of Education are available from 1990. Starting in 1996, full-time student equivalents are available by provider type, as shown in the following tables. These are not currently used by National Accounts.


Table 14. Child FTEs at Licensed Early Childhood Education Services (2001 - 2008)

table 14, child ftes at licensed early childhood education services

Adjustment of output quantity to represent actual hours of education received (rather than just enrolled), can be estimated using the one-week snapshots from RS61, which record hours enrolled, hours attended, and ‘casual’ not-enrolled hours.

Recommendation E4

The appropriate output measure of ECE education should be full-time student equivalents, disaggregated by service type. The definition of full-time at the ECE level should be consistent over time and across service types.


Recommendation E5

If quality-inclusive output measure is desired, data are available to compare enrolled ECE hours with actual ECE hours delivered in census weeks.

ECE licensing and regulation

ECE in New Zealand is funded, but not delivered, by the Ministry of Education. ECE services can be community-based or private. A community-based ECE service is an incorporated society, a charitable, statutory, or community trust, or owned by a community organisation (eg a city council, church, or university). Community-based services are prohibited from making financial gains that are distributed to their members. Private ECE services can be owned by a private company, publicly listed company, private trust, partnership, or an individual. Private services are able to make financial gains and distribute these to their members.

Any premises used regularly for the education or care of three or more children under the age of six must be licensed, except where specifically exempted by the Minister of Education. Licensing is regulated by the following pieces of legislation: Education (Early Childhood Services) Regulations 2008 (SR 2008/204); Education (Registration of Early Childhood Services Teachers) Regulations 2004 (SR 2004/236); and Education (Early Childhood Centres) Regulations 1998 (SR 1998/85). These regulations set out minimum requirements for: adult to child ratios, proportion of staff holding an ECE teaching qualification recognised by the New Zealand Teachers Council, and the curriculum required for licensing.

ECE provision and service types

ECE services can be provided and organised in a range of ways, as described in table 15.


Table 15. ECE service types

Licensed ECE Services

ECE Services

Education and Care Services
Correspondence School ECE Services
Homebased Childcare
Casual Childcare

Parent/whānau led ECE Services

Te Kōhanga Reo

Licence-Exempt ECE Groups

Nga Puna Kohungahunga
Pacific Island Early Childhood Groups
Playcentre (Licence-Exempt)
Te Kōhanga Reo (Licence-Exempt)

Source: MOE


Teacher-Led ECE Services are required to have a person responsible (or home-based care coordinator) who is a registered ECE qualified teacher, and they must meet the teacher registration targets for registered teacher staff. For funding purposes, teacher-led services include: Kindergartens, Education and Care Services, and Homebased Care Services.

  • Kindergartens are a teacher-led early childhood service represented by the New Zealand Kindergartens Inc. (NZKI) or the New Zealand Federation of Free Kindergartens, that provides sessional programmes for mainly three and four year old children. These have been treated as government entities in the National Accounts, but the classification is currently under review.
  • Education and Care Services provide sessional, all-day, or flexible-hour, programmes for children from birth to school age. They may be privately owned, community-based, or operated as an adjunct to a business or organisation. Individual Education and Care Services may be known by many names, including crèches, private kindergartens, aoga, punanga reo, and childcare centres. These services are teacher-led and required to meet the teacher registration targets.
  • Home-Based Childcare Services provide early childhood education to small groups of children in a caregiver, educator’s, or child’s own home. Home-based care services are grouped together in networks, which are supervised by co-coordinators who are registered teachers.
  • Correspondence School ECE Services offer distance learning programmes for children aged three to five years who are unable to attend or have limited access to early childhood services because of isolation, illness, a physical disability, or itinerancy. These children can also attend an early childhood service for up to two sessions per week.

Parent/Whānau Led ECE Services do not have to meet teacher registration targets, and have high levels of parent and/or whānau involvement in providing education and care for children. These services include licensed Playcentres and licensed Te Kōhanga Reo. They are not eligible for 20 hour free ECE funding from the Ministry of Education.

  • Playcentres Early childhood services that belong to an association affiliated with the New Zealand Playcentre Federation Inc. A primary characteristic of playcentres is that families manage and implement the education programme.
  • Te Kōhanga Reo An early childhood centre administered by the Te Kōhanga Reo National Trust. The programmes in Kōhanga Reo are based on the total immersion of children from birth to school age in Māori language, culture, and values.

Licence-Exempt ECE Groups have been issued an exemption from licensing requirements, in recognition of the fact that more than half of the children attend with a parent. They take the following forms.

  • Playgroups Community-based groups of parents and pre-school children whose playgroups meet for one to three sessions per week.
  • Ngā Puna Kōhungahunga Licence-exempt groups in community-based locations that are culturally appropriate for Māori.
  • Pacific Island Early Childhood Groups Available to pre-school children with the purpose of developing and maintaining Pacific Island languages and cultures. There is a high level of parent participation.

ECE funding history

The history of ECE funding is one of increasing complexity. ECE was funded in some format by the Ministry (then Department of Education) prior to 1990; reliable data are unavailable prior to 1990. The funding structure 1990–2005 consisted of five funding bands based on the provider and age of child: a quality and standard rate for under-two services, a quality and standard rate for over-two services, and a single rate for Kindergartens.

A new funding structure was implemented in 2005 that consisted of 34 funding bands. The rates at each funding band were set on the basis of the associated costs for different types of services, and the percentage of teachers that are qualified/registered. Kindergarten and Education & Care services were aggregated and assigned a funding band based on the proportion of qualified/registered teachers. Homebased, Te Kōhanga Reo, and Playcentres had specific service type rates, and were assigned either a quality or standard rate based on the operation and teachers at the centre. A separate licence-exempt rate existed for licence-exempt services.

With the introduction of the Free ECE policy in July 2007, another 14 rates were added to the funding structure. These rates were intended to cover all costs for the centre, so that parents did not have to pay fees.


Table 16. ECE funding rates effective from 1 July 2009



Scope issues in ECE

The boundary between education and care in ECE services is hazy. For this, we look to the International Standard Classification of Education for guidance. The main classification criteria for establishing the boundary between pre-primary education and childcare, or between pre-primary and primary education, according to ISCED are:

  • the educational properties of the programme;
  • school or centre based;
  • the minimum age of the children catered for;
  • the upper age limit of the children; and
  • the staff qualifications (subsidiary criterion).

For a programme to be considered as pre-primary education, it has to be school-based or centre-based. These terms are used to distinguish activities in settings. Such as, primary school, pre-schools, and kindergartens from services provided in households or family settings.

‘Such programmes are designed for children aged at least three years. This age has been chosen since programmes destined for younger children do not normally satisfy the educational criteria in ISCED. The upper age limit depends in each case on the typical age for entry into primary education.’ (ISCED, paragraphs 39–41.)

However, it also points out that flexibility is key, and that the guideline of age three does not preclude younger children from participating (paragraph 35) under conditions that meet the educational criteria.

  • Services based on an approved ECE curriculum. All licensed ECE providers must have a registered curriculum.
  • Services based at an ECE provider centre. Excludes home-based networks and ECE provision by the Correspondence School.
  • Age of pupils. Without providing justification, the ISCED definition implies that there is a minimum age required for ECE to be ‘education’ rather than ‘care’. ECE is bounded on the top by the age of entry into primary school (six). To satisfy this, we must select only pupils of ages three to five, which coincides with those chosen by the Ministry of Education for their 20 hours free ECE policy.

The ISCED goes on to say in paragraph 42: ‘Where appropriate, the requirement of pedagogical qualifications for the teaching staff can be a good proxy criterion for an educational programme in all those countries, in which such a requirement exists. It serves to distinguish pre-primary education from child-care for which para-medical or no qualifications are required.’

This brings us to the question of teacher qualification, which is represented in the available data in terms of teacher qualification, teacher registration (correlated with qualification but separate), and in the organisation and leadership of the ECE service. Teacher qualifications are used by the Ministry of Education as a proxy for higher quality educational services, for which the government is prepared to pay a premium13.

  • Services provided by qualified teachers. Select only those services with a minimum proportion of qualified and registered teachers.
  • Services designed and run by qualified teachers. Select only teacher-led services.

Finally, one question on which ISCED offers no guidance is that of duration. With the high labour participation rate, many parents of young children in New Zealand require childcare far beyond the 30 hours a week that is considered full-time ECE. Ministry of Education staff acknowledge that multiple enrolments are common and difficult to net out because young children do not have unique identifiers following them through the system the way that secondary students do. It seems unlikely that a child attending ECE 50 hours a week receives twice the educational services of a child attending 25 hours a week.

  • Duration. Is there a maximum volume of educational service that can be reasonably delivered to a child in a day? Select hours up to that point and declare the remainder ‘care’.

Recommendation E6

Stakeholders should be engaged in defining the boundary between education and care in manner consistent with the question these measures are intended to answer.

7.2.4 School top

This section describes the delivery and funding of primary and secondary education in New Zealand to help the reader understand, for example, the scoping issues as well as the general context for any ensuing productivity measure. Some data are supplied for illustration. For detailed information on the data sources referred to in this section, see chapter 10.

The recommended output measure for each level of schooling is number of pupils, adjusted for attainment. See section 7.2.1 for discussion of output concepts. Potential sources of attainment adjustment include standardised test scores, proportion of students leaving school with a qualification, and proportion of students leaving school with a qualification of a certain standard (eg university entrance).

Barring that, the recommended proxy is number of pupil-hours or full-time student equivalents. This measure may be further adjusted for attendance to more closely represent the actual education delivered, if desired, as it is in the UK; see section 10.2 for discussion of this option.

Recommendation E7

At a minimum, full-time student equivalents by level should be used to estimate school output quantity.

New Zealand School types

Schooling in New Zealand is compulsory from ages six to 16. It can be delivered by state, integrated, private, and special schools, or outside of a school setting by way of the Correspondence School or homeschooling.


Table 17. School Types with 2007 numbers

Primary: (2,045 schools)

Full Primary School (Year 1–8), 1,126 schools

Contributing School (Year 1–6), 796 schools

Intermediate School (Year 7–8), 123 schools

Kura Kaupapa Māori (Primary), 68 schools

Kura Teina (Primary)14, 2 schools

Composite: (144 schools)

Composite School (Year 1–15), 139 schools

Restricted Composite School (Year 7–10) (also known as Middle School), 4 schools

Kura Kaupapa Māori (Composite)

Correspondence School, 1school

Kura Teina (Composite), 3 schools

Secondary: (334 schools)

Secondary School (Year 7–15), 101 schools

Secondary School (Year 9–15), 233 schools

Secondary School (Year 11–15)

Other: (47 schools)

Special School, 47 schools

Homeschool, 6,473 students


Fully-funded state schools are co-educational at the primary level, and offer either single sex or co-educational options at the secondary level. The Ministry owns their capital, and pays their operating expenses and salaries. In 2007, 84.8 percent of students attended state schools.

State integrated schools are those that have previously been private and are now integrated into the state-funded system, as well as a handful of new schools with ‘special character’ set up in the same model. The Ministry pays their teachers’ salaries and operating expenses, but the capital is privately owned and maintained. In 2007, 11.1 percent of students attended state integrated schools.

Private schools are owned by private proprietors, governed by an independent board, and registered with the state as meeting specific standards. They receive some state funding in the form of per-student subsidies, and charge tuition fees. In 2007, 4.0 percent of students attended private schools.

The Correspondence School is a state school providing distance learning for full-time students, students simultaneously enrolled at their local school, adult students over age 19, and those with special education needs unable to attend regular school. The Correspondence School provides early childhood, primary, and secondary education. As of 2007, the Correspondence School had 5,546 students.

Kura Kaupapa Māori are state schools where the principal language of instruction is Te Reo Māori, and which follow the Te Aho Matua teaching and learning philosophy. The first Kura Kaupapa Māori opened in 1985. Kura Kaupapa Māori can be either primary or composite schools. Kura Teina are applicant schools accepted into the preparation and assessment process for establishment as a Kura Kaupapa Māori. As of 2007, there were 68 Kura Kaupapa Māori and 5 Kura Teina in New Zealand, serving 6,272 students.

Special schools provide specialist education or support for students with specific physical, behaviour, sensory, or intellectual support needs. There are 47 special schools and 8 residential special schools in New Zealand, serving 2,799 students. In addition to operating special schools, Vote Education funding is also made available for special needs students wherever their education is delivered, publicly or privately; this can pay directly for special education, or it may pay for services to support their education, such as speech therapy.

Exceptional cases

In addition to the various school types, there are delivery formats or student types that are sufficiently different from the categories above that they merit separate treatment.

International fee-paying students are international students studying at a secondary or tertiary level who meet the full tuition costs on their own or from funds provided to them by sponsors other than the New Zealand Ministry of Foreign Affairs and Trade. New Zealand Agency for International Development funded students are on scholarship from the New Zealand Agency for International Development (prior to 2004, this was known as a MFAT scholarship). They are reported separately from foreign-fee paying students. At July 2007, there were 10,204 foreign fee-paying students, comprised of 2,873 in Years 1–8, and 7,331 in Years 9–15. Foreign fee-paying students comprise 1.3 percent of the New Zealand school population.

Recommendation E8

A decision is required to include or exclude international students in accordance with the question these measures are intended to answer. International students must be treated consistently on both the inputs and output side, and should be treated consistently at the school and tertiary level.

Adult students over age 19 represented 4,671 students in 2007. Most of these students are either special needs students or refugees.

Homeschooling is a generic term for children schooled at home during the compulsory schooling ages (6 to 16). To homeschool a child, the parents/caregivers must satisfy the Ministry that the child will be taught at least as regularly and as well as they would have been in a registered school. If satisfied, the Ministry issues an exemption certificate and the student is deemed to be ‘homeschooled’. The parents/caregivers do not have to teach the child, they can arrange for someone else to teach the child or may purchase a programme from someone else. Homeschooling parents/caregivers are given an annual grant from the Ministry to help with the cost of learning materials or programme purchase. In 2007, there were 6,473 children being homeschooled in New Zealand, or less than 1 percent of the school population.

Separate alternative education programmes have been formally available since 2000 for students aged13 –16 who have become alienated from the education system and are either unwilling to attend a regular school, or schools are unwilling to enrol them, in a mainstream setting. In 2007, 1,318 students were enrolled in alternative education programmes.

Teen parent units provide educational programmes for teenagers who are pregnant or who have prime responsibility for their children’s care; and who have enrolled within the age range to receive free education (ie up to age 19 years). These units are attached to a host secondary school.

Recommendation E9

Alternative education programmes and teen parent units represent a sufficiently different service from mainstream secondary education that they merit separate treatment. This requires identifying them in the data on the inputs and output side so that they can be included or excluded as required by scope.

School Qualifications

New Zealand has offered a number of school qualifications. The paragraphs below describe the system as it existed prior to the introduction of the National Certificate of Educational Achievement (NCEA) in 2002.

School Certificate was usually taken in year 11 (Form 5) of school, but many secondary students at other levels also entered. School Certificate was awarded in single subjects. Most students took five or six subjects, or combined one or two School Certificate subjects with other courses offered by their school. Many School Certificate subjects were a mix of internal and external assessment.

Sixth Form Certificate was generally taken by students in year 12 (Form 6) of school. Most students took five or six subjects. Many studied Sixth Form Certificate subjects along with School Certificate or University Bursaries subjects. Sixth Form Certificate required at least four hours of supervised study per week in each subject. Students had to meet reasonable assignment and attendance requirements. Sixth Form Certificates were internally assessed by schools. Grades on a scale of 1 to 9 were awarded in individual subjects, with a grade 1 representing the highest achievement and grade 9 the lowest achievement.

Higher School Certificate was a course completion award, granted to candidates who completed five years of New Zealand secondary level education beginning at Year 9, and who are deemed by their school to have satisfactorily completed a year 13, 60 percent of which is at a level of study beyond year 12. Its principal purpose was to certify the satisfactory completion of five years' secondary schooling and, as a consequence, that the holder had a basic preparedness, including English language and study skills, for tertiary study. Students had to study at least three subjects in advance of Sixth Form Certificate. In addition to the University Bursaries subjects, NZQA approved 17 Higher School Certificate subjects. There were no external examinations, no grades or marks, and Higher School Certificate was not awarded in individual subjects. Higher School Certificate was part of the university entrance requirement.

Students generally entered University Entrance, Bursaries, and Scholarships (commonly known as Bursaries) at the end of year 13 (Form 7). As the full title indicates, the qualification served many purposes: candidates could qualify for entrance to university, gain monetary awards (bursaries), and be awarded scholarship grades for very high achievement. Results were used by employers and by tertiary education providers for deciding entrance and selection for tertiary courses. Students could take up to six subjects. In many subjects, there was a combination of internal assessment from the work completed during the year, and the national examination. Between 1986 and 1992 inclusive, the University Entrance qualification was awarded to candidates who scored grades D or higher in at least four Bursaries subjects. From and including 1993, the University Entrance qualification has been awarded to candidates who: either scored grades C or better in at least three Bursaries subjects and were awarded Higher School Certificate, or gained an A or a B Bursary.

The National Certificate of Educational Achievement (NCEA) was phased in from 2002 as New Zealand's national qualifications for senior secondary students. NCEA level 1 replaced School Certificate in 2002, NCEA level 2 was introduced in 2003, and NCEA level 3 and New Zealand Scholarship replaced University Entrance, Bursaries, and Scholarships in 2004. Schools offered Sixth Form Certificate (Transitional) instead of NCEA in 2003 and 2004.

NCEA qualifications are gained by building up credits awarded for each standard achieved. Standards are organised into 'levels' of increasing difficulty. Some are assessed internally, by teachers, and some externally in end-of-year exams. Most schools organise the assessment of their programmes and courses in groups of standards. There are two types of standards – 'unit standards' and 'achievement standards'. Achievement standards are 'not achieved' (fail), 'achieved', 'achieved with merit', or 'achieved with excellence'. Unit standards are either 'achieved' (pass) or 'not achieved' (fail).

The standards assessed in schools are usually at levels 1, 2, and 3. Most students will start at level 1 in year 11, though students often study at a mix of levels depending on their ability in particular subject areas. Schools prepare a programme and use a mix of standards to assess students as they progress. Not all students will be assessed against the same standards.

Each standard achieved is worth a certain number of credits. Credits count towards NCEA, and may also contribute towards other national certificates, such as the National Certificate in Mathematics.

Credits can be used for more than one qualification. NCEA level 1 is 80 credits achieved from level 1 or higher, and must include eight from numeracy standards and eight from literacy standards. NCEA level 2 requires a minimum of 60 credits at level 2 or above and 20 credits at any other level, with no specific literacy or numeracy requirements. NCEA level 3 requires 80 credits, of which 60 must be at level 3 or above, and 20 at level 2 or above.

School scope questions

Once the various exceptional cases above are treated, the primary scope question is around the outside boundary of school education. Potential scope-defining characteristics emerging from the available data include:

  • Services based on an approved curriculum. This should include homeschooling and school-to-work initiatives known as the Gateway programme.
  • Services based at a school. Excludes homeschooling and the Gateway programme.
  • Age of pupils. Schooling is compulsory to age 16 years, but students range into adulthood.

Recommendation E10

A decision is required on how to treat the Correspondence School. It should be applied consistently on both the inputs and output side so that it can be included or excluded as required by scope.

Another scope issue is the internal division between primary and secondary school. The International Standard Classification of Education defines primary education as having the following principal characteristics: ‘Programmes at level 1 are normally designed on a unit or project basis to give students a sound basic education in reading, writing, and mathematics, along with an elementary understanding of other subjects, such as history, geography, natural science, social science, art, and music’ (ISCED, paragraph 45).

ISCED cites as key criteria for primary school ‘the beginning of systematic studies characteristic of primary education, eg reading, writing, and mathematics’, with secondary consideration given to ‘entry into the nationally designated primary institutions or programmes; and the start of compulsory education where it exists’ (paragraph 48). Included in this category are programmes suitable for children with special needs, and ‘literacy programmes within or outside the school system which are similar in content to programmes in primary education for those considered too old to enter elementary schools are also included at this level because they require no previous formal education’ (ISCED, paragraph 51).

Barring other information, ISCED indicates that the first six years of compulsory education should be considered primary. By comparison, secondary education programmes ‘…are usually on a more subject-oriented pattern using more specialized teachers and more often several teachers conducting classes in their field of specialization. The full implementation of basic skills occurs at this level. The end of this level often coincides with the end of compulsory education where it exists’ (ISCED, paragraph 52).

The key criteria defining secondary school is that there are more qualified teachers conducting classes in their field of specialisation. ISCED also puts some bounds around age and achievement, expecting the equivalent of six years of education prior to secondary, and ending with the end of compulsory education.

7.2.5 Tertiary education top

This section describes the delivery and funding of tertiary education in New Zealand to help the reader understand, for example, the scoping issues as well as the general context for any ensuing productivity measure. For detailed information on the data sources referred to in this section, see chapter 10.

Tertiary education in New Zealand straddles three different ISCED levels, which are defined in terms of their complexity and purpose.

ISCED level 4 – post-secondary non-tertiary: These programmes are often not significantly more advanced than programmes at ISCED 3 (secondary), but they serve to broaden the knowledge of participants who have already completed a programme at ISCED level 3. Education beyond school level leading to an award not equivalent to a diploma is ISCED level 4. This level can be subdivided into programs that prepare for ISCED level 5, and those that prepare for direct entry into the labour market. It is important to note that for internationally comparative purposes this is considered post-secondary, rather than tertiary.

ISCED level 5 – first stage of tertiary education (not leading directly to an advanced research qualification): This level consists of tertiary programmes having an educational content more advanced than those offered at ISCED levels 3 and 4. Entry to these programmes normally requires the successful completion of ISCED level 3 or a similar qualification at level 4. These have a minimum cumulative theoretical duration (at tertiary) of three years’ full-time equivalent, although typically they are of four or more years. They typically require that the faculty have advanced research credentials, and they may involve completion of a research project or thesis. Programmes can be divided into those that are theoretically based/research preparatory/giving access to professions with high skills requirements programmes on the one hand, and practical/technical/occupationally specific programmes on the other hand. This level includes diplomas, degrees, and postgraduate programmes.

ISCED level 6 – second stage of tertiary education (leading to an advanced research qualification): This level is reserved for tertiary programmes which lead to the award of an advanced research qualification. The programmes are therefore devoted to advanced study and original research, and are not based on course-work only. Only doctoral degrees are ISCED level 6.

The New Zealand Qualifications Authority (NZQA) national qualifications framework has 10 levels, depending on the complexity of the learning. NQF Levels 1–3 are of approximately the same standard as senior secondary education and basic trades training, or ISCED level 4. Levels 4–6 approximate to advanced trades, technical, and business qualifications, also ISCED level 4. Levels 7 and above approximate to advanced qualifications of graduate and postgraduate standard. Level 7 (Bachelors degree or equivalent), level 8 (honours and postgraduate certificates or diplomas), and level 9 (Masters degree) are equivalent to ISCED level 5. Level 10 doctorates equate to ISCED level 6.

For reasons laid out in section 7.2.1, the recommended output measure for tertiary education is number of completed credits by level (1–3, 4–7 non-degree, bachelor and postgraduate), separated into subject area where possible. Barring that, the recommended proxy is full-time student equivalents by level (1–3, 4–7 non-degree, bachelor and postgraduate), separated into subject area where possible to reflect the different associated costs for various course types.

Recommendation E11

The most desirable output measure available for New Zealand’s tertiary education is credits completed broken down by: subsector (university, polytechnic, etc), qualification level, domestic/international, broad field of study, and public/private. 

Tertiary providers

The tertiary education sector in New Zealand – as defined by the Ministry of Education – includes all post-compulsory educational organisations that provide formal programmes of study. These can be divided into public tertiary education institutions (TEIs), government training establishments (GTEs), other tertiary education providers (OTEPs), and private tertiary education (PTE) providers. For Statistics NZ, non-TEI providers are considered ‘other education’, which is covered in section 7.7 of this report.

Public TEIs include universities, colleges of education, polytechnics, or wananga, as defined by the Education Act 1989. New Zealand’s eight universities are primarily concerned with advanced learning and knowledge, research, and teaching to a postgraduate level. Additionally, universities are charged by statute (Education Act 1989, section 162) with being ‘repositories of knowledge’ and serving as ‘critic and conscience of society’. Institutes of Technology and Polytechnics (normally known as polytechs) are characterised by a wide diversity of vocational and professional programmes. The three Wananga provide programmes with an emphasis on the application of knowledge regarding ahuatanga Māori (Māori tradition) according to tikanga Māori (Māori custom).

Colleges of education mainly provide specialist teacher education training, along with other non-teaching courses; such as, business, performing arts, sport coaching and science, as well as professional development for teachers. All of these institutions in New Zealand have now amalgamated with universities (see table below).


College of Education

Amalgamated with

Auckland College of Education

University of Auckland (2004)

Hamilton College of Education

University of Waikato (1992)

Palmerston North College of Education

Massey University (1996)

Wellington College of Education

Victoria University (2005)

Christchurch College of Education

University of Canterbury (2007)

Dunedin College of Education

University of Otago (2007)



Recommendation E12

Universities, polytechs and wananga provide distinct and separable educational services and should be treated as such. Care should be taken with the treatment of Auckland University of Technology, which moved from the polytech category to the university category.

Tertiary funding

The government provides funding for New Zealand students to undertake formal learning with a combination of student loans, student allowances, and tuition subsidies paid to tertiary education organisations. In the recent past, the largest share of this funding has been delivered through student component funding that is allocated on a per student basis, with differential rates set by subject area. In most cases, the student is also charged an enrolment fee. A question that flows naturally out of the funding model is how to handle direct student support when calculating tertiary education. A substitution between student support and university support is not a reduction of inputs from a whole-of-government perspective, but is from the perspective of an individual institution. Particular care must be taken to ensure that the education inputs are defined in a manner consistent with the overall question that productivity estimates are intended to answer.

Recommendation E13

The funding of tertiary education is complex and involves a large amount of co-financing across government and across the public/private split. Care should be taken to define the scope in a manner consistent with the question these measures are intended to answer, and to treat it consistently in both inputs and output.


Table 18. Government Operating Expenditure on Tertiary Education 2001-2008


The Tertiary Education Strategy 2007-12 accompanied substantial changes to the way tertiary education was managed, to the systems for the steering and funding of tertiary education and to the approach to quality assurance and monitoring. The new arrangements took effect from 1 January 2008. The system reforms have split the funding of tertiary education, so that 70 percent of funding supports the costs of teaching and learning, and 30 percent supports tertiary education organisations to ensure that they have the capability needed to focus on their core role and distinctive contribution.

From 2008, the student component has been replaced by a new investment system – under which the Tertiary Education Commission (TEC) will make three-year funding decisions based on the quality and relevance of the provision offered. Some funding – a new student achievement component – continues to be delivered on a per student basis, with some being allocated to tertiary education organisations to fund developments in their capability – the tertiary education organisation component15.

While the student achievement component and the tertiary education organisation component are the largest funds administered by the TEC, training programmes for some formal students are managed by the TEC through other funds, such as Youth Training, which are targeted to particular types of students.

Tertiary research funding

The main funding of research activities was historically delivered as part of the student component funding for degree and postgraduate enrolments, supplemented with 'research top ups'. This system was phased out from 2004–2006 and replaced with the Performance-Based Research Fund (PBRF). Under the PBRF, providers are allocated funding on the basis of their research performance, using a set of performance indicators complemented by peer assessment of the quality of their research.

The introduction of the PBRF system has shaped the distribution of research activity between tertiary subsectors. A 2008 study of the effects16 reported the following key findings:

  • The principal effect of the PBRF has been to shift research funding to the universities from institutes of technology/polytechnics.
  • Between the universities, the effects of the PBRF are more complicated. Discounting for the effects of subject-based weightings, there are five universities whose research quality allocations are clustered in a similar range on a full-time equivalent staff basis. The other two dimensions of the PBRF – research degree completions and external research income – produce greater variations of performance, and are therefore more important drivers of funding shifts.
  • The PBRF subject weightings tend to shift funding towards those universities with substantial research activities in the sciences and the applied sciences – more sharply than the old research top-ups system. In large part, this is a consequence of the fact that in some universities these fields are the focus of considerable research activity, but may not attract large numbers of enrolments. Conversely, some lower-funded fields that draw significant enrolments may have lower research performance.


Table 19. Funding for research through research top-ups and PBRF by sub-sector 2000-2007 ($million)

Source: MoE


In addition to funding scholars and institutions individually, the government supports seven inter-institutional research networks (CoREs) focused on areas of established research excellence of importance to New Zealand:

  • Growth and Development – Auckland
  • Maori Development and Advancement – Auckland
  • Molecular Bio-discovery – Auckland
  • Molecular Ecology and Evolution – Massey
  • Food and Biological – Massey
  • Advanced Materials and Nanotechnology – Victoria
  • Bio-Protection – Lincoln

Over and above these sources of research funding, tertiary education organisations are expected to raise additional research revenue through the contestable science funds supported by the government through Vote Research, Science and Technology. Tertiary education organisations also bid for contracts to provide research for firms and other organisations.


Table 20. Total research income by income type in the universities 2002-2006


Source: Tertiary Education Commission and Ministry of Education



Tertiary student support

Prior to1992, the government’s financial support for tertiary study had traditionally been in the form of tuition subsidies, paid directly to tertiary education providers, and ‘grants-in-aid’ which were paid directly to students and were principally intended to subsidise living costs. Tertiary assistance grants were also available to help with living costs. In 1980, in response to the increasing numbers of older students wanting to study full-time, hardship grants were introduced.

In 1989, taxable student allowances were introduced. In 1992, the government introduced the Student Loan Scheme. This provided students with the opportunity to borrow for tuition fees, course costs, and living expenses. In 2000, the government altered the Student Loan Scheme so that students were not charged interest while studying. In 2006, student loans were made interest free for borrowers who are resident in New Zealand.


Table 21. Government financial support for tertiary study 1997/98–2007/08

Fiscal year

Student allowances

Tuition subsidies

Student loans


Total as a % of Gross Domestic Product


$ (millions)







































































Source: MOE


Tertiary student Fees

Between 1992 and 2000, there was an unregulated fee environment. This coincided with a period when the government was reducing the amount of funding per student to increase the share of their education costs paid by students. This resulted in significant increases in fees during this time.

The government introduced the fee stabilisation policy in 2001 to address the significant increases in domestic tuition fees that had occurred since 1992 in the unregulated fee environment; the government offered TEOs an increase in tuition subsidy rates in 2001 in return for freezing their domestic tuition fees at 2000 levels. The government repeated the process in 2002 and 2003 with further increases in tuition subsidy rates in return for domestic fees remaining frozen at 2000 levels.

The Fee and Course Costs Maxima (FCCM) policy was introduced in 2004. Under this policy, the government publishes a maximum fee level for each category of course, with high-cost courses having higher maxima than low-cost courses. Undergraduate fees are limited by FCCM and can only increase by 5 percent each year towards the maxima, via the Annual Fee Movement Limit (AFML). At the postgraduate level, fees can increase by a maximum of $500 per year on an EFTS basis, via the Postgraduate Fee Increase Limit (PFIL).

While most students in formal tertiary education are New Zealanders, international students also make up a significant number of formal students. International students are usually required to pay the full costs of their tuition. Australian citizens, students on approved exchange schemes between NZ and foreign providers, and international doctoral students are treated as domestic students and pay domestic fees.

Tertiary scope questions

The primary scope concerns in the tertiary sector are: (1) distinguishing between educational services and other services (eg research) provided by the tertiary sector; and (2) the boundary between tertiary and other education.

Tertiary research output

Research is recognised as an important output of universities, but there is no international consensus at this time on a research output measure. Quantifying and quality-adjusting research output is known to be a difficult matter that raises some of the general problems associated with the measurement of R&D activities; such as, whether unsuccessful research constitutes output. Given the need to capitalise research and development within the National Accounts under the System of National Accounts 2008, it may be prudent to wait for further guidance from and decisions by the community of National Accountants.

Recommendation E14

Research is recognised as an important output of universities with an income stream that is increasingly separate and identifiable. However, identifying research funding in a longer time series may be impossible at this time. Stakeholders should be engaged in discussion about whether to explicitly include or exclude research within the productivity estimates.

Research output was quantified inconsistently across institutions prior to the introduction of the PBRF in 2004. Additionally, funding was used for research without being specifically allotted to it. Under the PBRF, research funding is delineated and research output is quality assessed (rather than quantified). This seems a solid measure going forward, but would not provide the time-series we are looking for at this time.

Because universities have different ways of counting research output, care should be taken when comparing research output per FTE academic staff.


Table 22. University reported research output per full-time equivalent (FTE) academic staff member 2002-2007








Auckland University of Technology







University of Otago







Victoria University of Wellington







Note: Some universities do not report research output counts in their annual reports (Auckland, Massey) while others do not report on a comparable basis over time (Lincoln, Waikato).

The research output totals include college of education totals.

Source: MOE, from annual reports of the universities and colleges of education


Analysts at the Ministry of Education’s Tertiary Sector Performance Analysis and Reporting (TSPAR) unit believe that the most reliable approach to measuring research output prior to the PBRF is the share of publications and citations indexed within aggregated bibliometric indexes of research. This method is strongly biased toward the sciences and is fraught with compositional change issues that would be very challenging to net out. The Ministry of Research, Science, and Technology (MoRST) holds the unit record data, which is prohibitively priced. TSPAR analysts would be eager to share the data should Statistics NZ wish to buy this data annually.


Table 23. Share of world indexed publications and citations by New Zealand TEIs


Five-year period




















Source: Thomson Reuters

Another possible measure is external research income. This provides a reasonable proxy for the commercial value of research, but is distorting when used as an approximation of social value. A selection of available data illustrating each of these options is presented in the three tables below.


Table 24. Ratio of citations per research paper by New Zealand TEIs to citations per research paper worldwide


Table 25. University research contract income per academic FTE 2002-2006







Auckland University of Technology






Lincoln University






Massey University






University of Auckland






University of Canterbury






University of Otago






University of Waikato






Victoria University of Wellington






All universities






Note: Colleges of education data are combined with the universities. The PBRF external research income is used as the measure of contract income.

Source: Annual reports of the universities and the Tertiary Education Commission


Recommendation E15

Research is acknowledged as an important output of universities that involves extensive co-funding and co-production. Given the lack consistent data and the uncertainty of research’s treatment in the National Accounts, it would be difficult to create a robust measure for it at this time. A decision will be required to either include or exclude identifiable research on both the inputs and output side.

7.2.6 Other education top

This section describes delivery and funding of other education in New Zealand to help the reader understand, for example, the scoping issues as well as the general context for any ensuing productivity measure. For detailed information on the data sources referred to in this section, see chapter 10.

Other education is the residual category for educational and training services that fall outside of the ECE, school, and provider-based tertiary categories. This ANZSIC 1996 classification (N8440) includes art, dance, drama, music, and other performance schools; skills development such as driving, English language, and elocution; and the administration (as opposed to delivery) of educational programmes, eg Industry Training Organizations. Under ANZSIC 06, ‘Other education’ will be further divided to separate out arts education (eg the national Dance and Drama schools) and ‘Educational Support Services’ defined as those ‘engaged in providing non-instructional services that support educational processes or systems’. Tertiary and other education are currently combined in the Ministry of Education data, and will need to be separated for mapping to ANZSIC.

Other education is considered informal and is therefore not covered by the ISCED classification.

While there is no specific output measure recommendation for other education, the internationally recommended output measure for tertiary education is number of completed credits by level (1–3, 4–7 non-degree), separated into subject area where possible. Barring that, the recommended proxy is full-time student equivalents by level (1–3, 4–7 non-degree), separated into subject area where possible.

Other education providers

Other education providers include: government training establishments (GTEs), other tertiary education providers (OTEPs), and private tertiary education (PTE) providers.

GTEs are state-owned organisations other than educational institutions that provide education, training, or assessment services (eg Navy, Department of Conservation); this is a term used mainly by NZQA when registering and accrediting training sections of government organisations.

OTEPs are organisations not elsewhere classified that deliver programmes of tertiary education or in support of tertiary education of some national significance. The New Zealand Schools of Dance and Drama are examples. While it is important to note these in an exhaustive list, these categories are not numerically significant.

PTEs are private institutions registered with the New Zealand Qualifications Authority and other tertiary education providers (OTEP) in receipt of grant funding from the Tertiary Education Commission. Some offer training for specific employers on a full cost-recovery basis. Others are funded by the government for the delivery of targeted training programmes and some have arrangements with Industry Training Organisations (ITOs) to deliver programmes funded through the Industry Training Fund. PTEs may also receive tuition subsidies through the student achievement component, while some receive no Crown funding at all. Many of those that receive no funding are English language schools that cater to full-fee-paying international students. Registered PTEs must meet the financial, educational, and management quality requirements set by the NZQA, and funded PTEs have also to meet the financial and management requirements set by the TEC.

Other education funding

Other education is often publicly funded, to some extent, but privately delivered, as with industry training17 . Government funding is administered through the Tertiary Education Commission. The Ministry of Education only has reliable data for those education providers it funds in some way. Additional sources of information would be required to produce productivity estimates for other education.


Table 26. Government and Industry Expenditure on Other Tertiary Education


Recommendation E16

Consideration must be given to consistently applying definitions of government and private education across all levels. The definition selected should fit the question that government productivity measures are intended to answer. There is the strong possibility that no ‘other education’ providers should be legitimately included in the government sector.

Other education scope questions

Other education can be provided by government training establishments (eg NZ Police Academy), public ‘other’ tertiary providers (eg the national dance and drama academy), and private tertiary providers.

There are two major categories that straddle the boundaries of education that will need careful consideration: non-provider-based education and non-formal education. In both of these cases, the treatment needs to be consistent on both the inputs and output side.

Non-provider based education

Industry training is designed and delivered in conjunction with industry, and counts toward recognised qualifications. The training is administered and supported through the 37 industry training organizations, which have been established by particular industries. In the industry training system, all trainees enter into a training agreement with their employers. Most of the training takes place on the job and progress is assessed by registered assessors. Industry training organisations (ITOs) facilitate individual training arrangements, purchase off-job training from tertiary education providers, and then tailor these arrangements to the needs of learners and employers.

Within industry training, there is a modern apprenticeship scheme that is an employment-based education initiative aimed at encouraging participation in industry training by young people aged 16–21 years. The initiative combines the mentoring aspect of the apprenticeship tradition with formal industry training that leads to recognised qualifications at levels 3–4. The programme is administered by TEC, which contracts the services of Modern Apprenticeships coordinators.

There are a series of targeted non-tertiary training programmes for skill development within New Zealand administered by TEC (formerly by Skill NZ); Programmes include Skill Enhancement, Training Opportunities, and Youth Training.

Skill Enhancement is a vocational training programme for young Maori and Pacific peoples, with a wide range of pathways that lead to qualifications at level 3 and above. This programme was disestablished in the 2009 budget.

Training Opportunities is a labour market programme for people aged 18 years and over who are considered disadvantaged in terms of employment and educational achievement. These programmes provide foundation and vocational skills training at levels 1–3.

Youth Training is for youth up to the age of 18 years who have left school with no or very low-level qualifications. These programmes provide foundation and vocational skills training at levels 1–3.

Gateway is available to state and integrated secondary schools, and supports senior secondary students (Year 11 to Year 13) undertaking structured workplace learning across a range of industries and businesses around New Zealand, while continuing to study at school.

Workplace Literacy funding is available for literacy, language, and numeracy training, and integrated with vocational/workplace training to help workers meet their employment and training needs.

Non-formal education

Education that does not contribute to a recognised qualification is considered non-formal. Adult and community education (ACE) can be provider-based through community education providers, tertiary education institutions, schools, and others. It can also be non-provider based, offered through community organisations and adult literacy programmes.

ACE is supported by and delivered through a range of community organisations. Funding for ACE is also available to schools and tertiary education institutions. Analysts at the Ministry of Education do not recommend using data for ACE delivered outside of TEIs, as it is not considered robust.

Recommendation E17

The most desirable output measure for industry and targeted training is credits completed by level.


Recommendation E18

On the basis of its small size and poor data availability, it is recommended that Adult and Community education be excluded from productivity estimates for the present.

7.3 Education inputs top

This section focuses on the data requirements and availability of appropriate data for measuring inputs to education, as the concepts and methods are rather less contentious than is the case for output.

7.3.1 Labour inputs

Labour input should ideally be actual hours worked broken down by staff type. In most labour measures used by Statistics NZ, hours paid is used as a proxy for hours worked for reasons of data availability. Measured sector productivity estimates use a labour volume series that combines various Statistics NZ labour data sources into a coherent volume measure of labour services by industry. See section 6.3.2 for a detailed discussion about the compilation of these data.

Within the education-specific data, teaching staff is generally recorded separately from other labour, and is privileged in analytical reporting. While teaching is the primary category of labour in education, substitutions are possible between different forms of labour (eg teachers doing administrative work), and between labour and intermediate consumption or capital (eg using computers and broadband to facilitate distance learning rather than adding teachers). For this reason, it is important to capture all categories of labour.

ECE labour inputs

The Ministry of Education collects ECE labour information in the Annual Return of Children and Staff, described in the output data availability section later in this report. The Ministry publishes a time series of ECE full-time teacher equivalents (FTTEs) by provider type. These data are available from 2005, and shown for demonstration purposes in table 2718. Although not published, the Ministry also collects the component information required to calculate three different categories of non-teaching staff FTEs: senior management staff, support staff, and specialists (eg psychologists, physiotherapists). See section 9.1.1 for further discussion of this collection.


Table 27. Usual teaching staff (FTTE*) in licensed ECE services by type of service


Cautionary Note

Some forms of ECE, including Playcentres and Te Kohanga reo, incorporate unpaid labour by design. This can impact labour productivity, and should be treated transparently in engagement with stakeholders.

Should further information differentiating labour quality be desired, qualification of teaching staff19 can be used (available from 2001). Qualification levels of ECE teachers have been rising over time. In general, kindergartens, home-based networks, and the Correspondence School have much higher levels of qualification, as shown in the annual snapshot table below.


Table 28. Teaching staff (headcount) at teacher-led ECE services by service type and qualified status as at 1 July 2008

Service Type

Qualified Staff

Not Qualified Staff

Qualified %





Casual-education and care




Education and care




Homebased network




Correspondence School








Source: MOE


School labour inputs

At the present time, teacher salaries in state and state integrated schools are legally required to be paid directly by the Ministry of Education on the basis of payscales set in collective contracts (ie no performance-based pay). This pay can be topped up with ‘allowances’ of a specified amount for additional duties, as well as retention bonuses for hard-to-staff schools. Principals have a separate contractual payscale that operates in a similar fashion. All payroll transactional data for teachers, principals, and a substantial proportion (~90 percent) of support staff at state and state integrated schools since 1999, is captured in the Teacher's Payroll Data Warehouse. To date, no reliable way of distinguishing hours paid from actual hours worked has been identified.


Table 29. Full-Time Teacher Equivalents at State and State Integrated Schools by school type


Private schools provide teacher counts on the June roll returns, but the information is much less detailed; the best existing labour data for teachers and other employees of private schools is likely to be from the LEED database.

Also included in the Teacher's Payroll Data Warehouse is data from the Teacher Census. The Teacher Census is a survey of teachers working in state and state integrated schools carried out by the Ministry of Education every three years. Teacher Census data collections have taken place in 1998, 2001, and 2004. Ethnicity and date of birth information collected by the census is used to validate details held on the payroll. Aggregate Teacher Census information is analysed by the Ministry of Education, and results are published and made available to teachers, schools, and teacher organisations.

Treatment of teacher training and development

Further information about changes in labour input quality over time is available in the existing data on teacher qualification and/or experience. Teacher qualifications show an important but complex relationship to student outcomes. The international evidence shows that non-qualified adults working as teachers or teacher aides do not generally have a positive impact on student outcomes, and in some cases have negative impacts. Conversely, highly qualified teachers can have very marked impacts on the outcomes for diverse students, particularly younger students. Students learn more from teachers with high academic skills than teachers with weak academic skills. The evidence is stronger when higher order student outcomes, such as critical thinking and sustained thoughtfulness, are included in outcome measures.

For this reason, the Ministry of Education already publishes several indicators related to teacher qualification from the teacher census data.

In addition to initial teacher training, labour quality is affected by ongoing professional development. The Ministry of Education runs a variety of targeted professional development programmes for that aim to improve student outcomes by improving teaching. While these programmes do not alter the labour input quality of individual teachers in a transparent way like an additional qualification, expenditure on these programmes flows through into the labour income shares used to weight labour and capital when calculating productivity.

The Literacy Professional Development Project (LPDP) began in March 2004. The LPDP has a focus on improving teacher content knowledge in literacy, pedagogy, and practice, and building effective professional learning communities. The project provides schools with an evidence-based professional development programme that aims to improve student learning and achievement in literacy. A total of 288 schools (3,288 teachers) have participated in the project to date. Schools work within the project for two years.

An independent evaluation of LPDP was commissioned and undertaken by the New Zealand Council for Educational Research (NZCER) in collaboration with the University of Canterbury. The final evaluation report was received by the Ministry in August 2007. Overall, the evaluation found that the gains in reading and writing achievement by students from schools in the LPDP were greater than those that could be expected without the intervention.

The underlying philosophy behind the Ministry of Education's Numeracy Development Projects (NDP) is that teachers are key figures in changing the way in which mathematics is taught and learned in schools. Their subject matter and pedagogical knowledge are critical factors in the teaching of mathematics for understanding. The effective teacher of mathematics has a thorough and deep understanding of the subject matter to be taught, how students are likely to learn it, and the difficulties and misunderstandings they are likely to encounter. The focus of the NDP is to improve student performance in mathematics through improving the professional capability of teachers.

Tertiary labour inputs

The recommended labour input measure for tertiary education is hours worked by employee type. Unlike school teachers, tertiary workers are not paid directly by the Ministry, so there is no equivalent of the Teachers Payroll Data Warehouse. Detailed academic staffing data collections at the Ministry of Education go back to 1997, and are considered of good quality from 2000. Research staff at the Ministry have backdated them to 1994 for universities and polytechnics, and 1995 for wananga. While there exists gross personnel expenditure of good quality from 1998 for public TEIs, there is not the equivalent data for PTEs or industry training.


Table 30. Academic staff FTEs employed in public providers by sub-sector


Table 31. Non-academic staff FTEs employed in public providers by sub-sector


For further information on changes in labour quality over time, the staffing data includes the required information for differentiating labour input quality by academic rank starting from 1994/5, with an incomplete collection of salary scales to provide cost weights. A certain amount of interpolation would be required.

Private TEI staff data are provided to Ministry of Education. The non-academic staff data in private and public educational institutions are considered weaker than the academic equivalent. The best existing labour data for teachers and other employees of private schools are likely to be from the LEED database .

Treatment of labour devoted to tertiary sector research

Research is an important output of the tertiary sector, as discussed in section 7.3.5. While there is no direct measure of hours devoted to research or service, the notional expected labour allotment for academic staff at a university is 40 percent teaching, 40 percent research, and 20 percent service. A certain proportion of academic appointments are identifiable as research-only.

Funding designated for research is an identifiable stream from 2000 onward, representing 15 percent to 20 percent of university revenue, but Ministry and university staff acknowledge that the boundary between research and other academic work is far from crisp; research has also been funded out of the general funding.

Recommendation E19

Labour devoted to tertiary research should be estimated and treated in a manner consistent with the treatment of research output.

Other education labour inputs

Other education is the least well-documented subsector of education. There are aggregate figures for how much programs cost and how many students go through them, but not how the money is spent in the production of those educational services, which are neither owned by nor paid directly by the Ministry of Education. Current information suggests that the best information available may already be held within Statistics NZ, feeding into the National Accounts and LEED. This can provide labour, capital, and intermediate consumption data on a case-by-case basis for the few public educational institutes not included in other categories (eg the national dance and drama school).

Outside of these few public educational institutes, other education is both co-financed and co-produced. The Industry Training, Modern Apprenticeships, and Gateway programmes are workplace-based, with labour and capital that would be very challenging to identify. The Industry Training Organizations (ITOs) that administer these educational programmes vary in size across industries, and over time, in a way that suggests that they are not a reliable proxy for inputs to education.

Targeted training, including the Skill Enhancement, Training Opportunities, and Youth Training programmes, are largely delivered by tertiary providers using labour and capital that will be accounted for in the tertiary sector inputs and the funding streams earmarked for those programmes.

7.3.2 Capital inputs top

This section focuses on the data requirements and availability of appropriate data for measuring capital inputs to education, as the concepts and methods are rather less contentious than is the case for output. It also highlights some scope questions that specifically manifest in use of capital.

Capital inputs to production are not the capital itself, but the flow of services from capital, which are not directly observable. These services are approximated by assuming that service flows are in proportion to the productive capital stock (stock of capital assets after each vintage has been converted into ‘efficiency-standardised’ units representing the amount of use remaining in them). The capital services used in the National Accounts is calculated for all industries within a perpetual inventory model (PIM). This calculates consumption of fixed capital for each of 26 assets by industry and year. See section 6.3.7 for a detailed discussion of the compilation of these data.

ECE capital inputs

All ECE capital is privately held. This sector is covered by the Annual Enterprise Survey, so Statistics NZ coverage of ECE capital is equivalent to that of other industries.

School capital inputs

The Ministry of Education stores schools' financial accounts in the Financial Information Database for Schools (FIDS). The financial data are first categorised by the school and then aggregated by the Ministry for national trends. What falls in the category of revenue or expense is subject to interpretation at each school. Detailed data on intermediate consumption and capital formation in state and state integrated schools are already supplied by the Ministry of Education to Statistics NZ for the purposes of government accounts. The government accounts data are slightly more disaggregated and already aligned with the categories required by the National Accounts, but should not be treated as a separate data source, as it is also sourced from FIDS.

Capital input should ideally be disaggregated by type, as well as the characteristics, of the receiving school, which are available in the FIDS data. The Ministry publishes a variety of financial series for schools, broken down by school type and authority (ie state, state integrated, or private). Published expense categories include administration, depreciation, learning resources, local funds expenditure, property, and other expenses. Operational funding categories include base funding, careers, heat/light/water, isolation, maintenance, Maori language, NCEA, other, per pupil funding, relieving, Secondary Tertiary Alignment Resources, special education grants, Targeted Funding for Educational Achievement, and vandalism. Custom aggregations can be made available by agreement between Statistics NZ and the custodians of the FIDS database at the Ministry of Education.

Treatment of capital in state integrated schools

An unusual feature of state integrated schools introduces an additional level of complexity for compiling accurate estimates of productivity. Capital services in state integrated schools are consumed in the public sector, but generated by capital held in the private sector (eg by the church or educational trust). Care will have to be taken to fully account for relevant capital, which will be reported in industry QA (Personal and other services) with churches20 rather than industry NA (Education). If the capital is rented by the church to the school at market prices, the flow of services will be represented in intermediate consumption and no adjustments are required. If the property is provided for use at less than market prices, the productive capital stock (PKS) used for education services, along with the associated consumption of fixed capital and value added, should be identified. Where capital used for the school and that used for other purposes are intermingled, it may be possible to use depreciation estimates from the Ministry of Education to proxy how much is used for educational services.

From there: (1) appropriate rent can be imputed in NA, or (2) adjustment can be made to move the PKS, associated consumption of fixed capital, and value added from QA to NA, as demonstrated in table 32.


Table 32. Treatment of state integrated school capital

derived figures in italics

Without adjustment

After adjustment

ANZSIC Industry

NA Education (integrated only)

QA Community Services

NA Education (integrated only)

QA Community Services

Gross Output (IC+COE+CFK)





Intermediate consumption





Cost of Employment





Consumption of Fixed Capital (school)





Consumption of Fixed Capital (other)





Value added (GO-IC)





Productive Capital Stock





Productivity Numerator





Productivity Denominator





Total Factor Productivity






These manual adjustments are labour intensive, prone to error, and introduce deviation from the published National Accounts. If the capital is added to industry NA without removing it from QA, non-market estimates would be correct, but the suite of productivity estimates as a whole will be incorrect because of the overstatement of QA.

Alternatively, it may be acceptable to state that capital inputs will be underestimated at the 357 state integrated schools serving approximately 11 percent of students, and provide range estimates of the potential error introduced by this choice. This will affect the income shares and therefore input levels, but will impact percentage change minimally if the proportion of the students at state integrated schools remains consistent.

Tertiary capital inputs

The recommended capital input measure for tertiary education is capital disaggregated by type. For the tertiary sector, existing expenditure data from the Statistics NZ government accounts seems to represent the best available data source.

7.3.3 Intermediate consumption top

This section briefly covers the data requirements and availability of appropriate data for measuring intermediate consumption in education. Intermediate consumption goods can be measured explicitly as an input, or implicitly by using value-added as the output measure. Value added is defined as gross output less intermediate consumption. Detailed intermediate consumption by industry is periodically benchmarked by Statistics NZ (most recently in 1997 and 2008); in the intervening years, the breakdown of intermediate consumption expenditure into various inputs is approximated in an economy-wide supply/use balancing process. The 2009 commodity data collection for education covered private education only, but the intermediate consumption patterns for ECE, schooling, and other education are expected to be similar. Private tertiary education is substantively different from that offered at public institutions, and should not be used as a proxy if direct measures exist.

ECE intermediate consumption

The Ministry of Education has put a great deal of work into identifying the costs associated with government-funded ECE as part of the 20 Hours Free ECE programme21. This is likely to be the best model for identifying the inputs associated with the government-funded portion of ECE.


Table 33. Average cost per enrolled hour by ECE service type

Average Cost



Education & Care












Te Kōhanga Reo



Source: MOE


The Ministry of Education developed funding rates for 20 Hours ECE by calculating the:

1. average cost per hour of ECE: using the total costs of provision from the 2006 Operating Cost Survey for each type of early childhood education service (Sessional Education and Care, All Day Education and Care, Home Based, and Te Kōhanga Reo), and dividing costs by the number of hours of early childhood education provided.

2. average government funding subsidies: using the subsidy rates paid in 2005/06 (the period that most services’ Operating Cost Survey related to).

3. average amounts of cross-subsidisation or cost-smoothing: using information on fees and subsidy rates for different age groups and periods of attendance in early childhood education, this estimates how services currently use fees and subsidies to offset their costs; in particular, the estimated additional contribution being made by the first 20 hours per week for three and four year-olds. This amount was then added to the average cost per hour in step 1.

4. costs not met by government funding: adding the results of steps 1 (average cost) and 3 (cross-subsidisation), then subtracting step 2 (funding subsidies), calculated the amount needed in 2005/06 to provide 20 Hours ECE.

5. cost increases since 2005/06: an inflation increase to the results of step 4 (costs not met by government funding).

6. total 20 Hours ECE funding rates: by adding the results of steps 4 and 5 to early childhood education funding subsidy rates (from 1 July 2007).

School intermediate consumption

Intermediate consumption data are sourced from the FIDS database discussed in section 7.3.2.

Tertiary intermediate consumption

For the tertiary sector, existing expenditure data from the Statistics NZ government accounts seems to represent the best available data source.

2 Control is defined as ‘the ability to determine general corporate policy by appointing appropriate directors, if necessary’. See SNA 1993, paragraph 4.30 for discussion.

3 Homeschooling is excluded from this table as it is provided outside of educational institutions.

4 All colleges of education have been incorporated into universities

5 Levels of local funding and investment income vary noticeably by decile, with decile 10 schools receiving 119 percent to 147 percent of the total revenue from all sources that is received by decile 1 schools.

6 Ancillary educational services, including school administration, transportation, and catering, should be deflated or directly estimated in volume separately from core educational services. (OECD 2008, paragraph 2.24).

7 It is acknowledged that some subsectors – namely tertiary – have other outputs of equal importance. See section 7.2.6 for discussion of tertiary sector research.

8 International opinion on the relationship between class size and educational outcomes is mixed. See Blatchford (2009) for a summary of the class size debate.  It is important enough to merit inclusion as a quality-adjustment option in the forthcoming OECD handbook on measuring education output, but has fallen out of favour as a determining factor in NZ education policy as a result research showing that effective teaching, regardless of class size, has a more powerful impact.. See, for example, Hattie (2005).

9 Constant quality of teaching must be specified in this assumption. Research suggests that quality of teaching matters a great deal, potentially doubling a child’s learning in a year. But as with the extra effort put in by more engaged students, teaching quality is only observable in a limited sense.

10 This would be an ‘A method’ in the schema proposed by Eurostat (2001), as discussed in section 5.4.1.
11 This is reflected in the funding of ECE. See table 16.

12 Kura Teina are included in the Full Primary and Composite totals.

13 While this is accurate as of the time of writing, education funding and policy is in flux and may be restructured.


15 Some polytechnics deliver the off-job component of industry training.

16 One full-time teacher equivalent is defined as a teacher employed for a full working week. This may be varied, for example, by two teachers sharing a full-time teaching equivalent. FTTEs are calculated by adding together total part-time hours worked, dividing by 25, and rounding to two decimal places.

17 Educational research indicates that teacher qualification is strongly correlated with improved educational outcomes, where ‘years of experience’ is not. See Cameron, M. and Baker, R. (2004), and discussion in section 7.3.1.

18 It is possible in the case of large churches, that real estate is held by a separate reporting unit classified to LC property services.

19 More information on this process is available at

20 It is possible in the case of large churches, that real estate is held by a seperate reporting unit classified to LC property services

21 More information on this process is available at

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