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The country's eight universities are at risk of a financial shock and should consider forming a single University of New Zealand, former Massey University chancellor Russ Ballard says.

Dr Ballard told RNZ's Nine to Noon programme today the current arrangement of eight separate universities was not in the country's best interests and they should work together more closely to share costs.

• This story was first published by RNZ

He said the universities competed with one another for students and were extremely dependent on income from foreign students, because government funding was inadequate.

The universities had cut costs, but largely at the level of individual institutions, rather than as a group, he said.

"Their ability to cut further back without some assistance or additional funding from the Crown is getting pretty limited now, so they're very susceptible to a shock which would come either from international students or declining domestic enrolments."

Dr Ballard said the government should not give more money to the universities without first considering whether the structure of the system needed to change.

"Having a model with eight separate universities all requiring their own institutional arrangements and administrative costs is not a very effective way for a small economy like New Zealand," he said.

Dr Ballard said they would be better off operating under the oversight of a single national body. The universities could create a single administrative structure with one enrollment system and decide which functions were best delegated to individual institutions and which were best tackled centrally.

"Decisions about what would be centralised and what would be not centralised would not be driven by government but would be driven by a council, which would be the council of the University of New Zealand," he said.

Dr Ballard said each university would retain its own character and areas of specialisation, but they would be more flexible about their boundaries and size.

He said the University of Auckland could be a separate entity because it was big enough to stand alone on an international basis though it could subsume AUT or Massey University's Albany campus.

"That needs to be looked at with a view to the future about how do you best position New Zealand universities to exist in the sort of environment which we're likely to be facing in the next 15, 20 years."