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The university today released its annual economic impact report, which indicates $1.044 billion spent in Dunedin in 2018 was directly related to the university.
The total includes actual spending by the university and estimated spending by its staff and students.
Vice-chancellor Prof Harlene Hayne said the report highlighted the university's contribution to its "hometown".
"We estimate that the University directly and indirectly supported 16,265 jobs in Dunedin, with a further 892 in Christchurch and 830 in Wellington.
"For the University to add an estimated $1.050 billion to the Dunedin economy shows its deep connection and contribution to its hometown.
"It’s also noteworthy to reach a significant milestone when the total impact exceeds $2b as we celebrates our 150th year with the province and New Zealand," Prof Hayne said.
Across the country, the university contributed about $1.163 billion to the economy, via its sites in Dunedin, Christchurch, Wellington, Invercargill and Auckland.
If the indirect, or flow-on expenditure - for example, the university buys supplies from a local business, that business in turn needs to employ staff and buy raw products from another supplier to meet the demand - was taken into account, the total spend in Dunedin increased to $1.8 billion, and just over $2 billion nationally.
The university used a "standard economic contribution methodology'' to estimate its economic impact, a report to be considered by the university's council today says.
It had 18,800 equivalent full-time students enrolled and employed 4080 full-time equivalent staff across all of its sites in 2018.
The Dunedin campus was by far the largest site, with about 92% of students and 87% of all staff located there.
The report, from the university's office of planning and funding, concluded that the university contributed very significantly to the Dunedin economy, and had a valuable contribution in the other cities in which if had a presence.
While expenditure by the university and its staff and students had a direct influence on local economic development, the wider flow-on effects were even greater, it said.
"The impacts are far-reaching across many sectors of the economy, with the institution and its staff and students spending widely in local businesses.
"This in turn creates additional activity as these businesses then purchase further goods and services to meet this demand.
The university "plays a fundamental role in the ongoing vitality of the city's economy,'' it said.
The University of Otago is one of the largest employers in the South Island.