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From next year, 5% of providers' government funding will be linked to student performance measures such as course completion, student retention and the number of students progressing to higher levels of study.
Teenage students studying for pre-degree qualifications are most at risk of dropping out and failing to complete their courses, and most of that group are enrolled at polytechnics or private training establishments.
The performance targets will be announced before the end of the year.
Tertiary Education Minister Steven Joyce said the measures would be different in each of four NZQA qualifications categories, level 1-2, 3-4, 5-6 and 7-8.
Mr Ker said while Otago Polytechnic had not yet been able to model what its performance results would be at each level, at the aggregate level "we seem to be performing well".
"Even when we do look at the breakdown, I am not expecting issues, because our own analysis shows that we have no programmes performing poorly in the national sense."
A report to the polytechnic council last year said across all New Zealand tertiary education providers, 56% of first-year students studying at levels 1-3 dropped out.
Otago's attrition rates were 23.6% last year and 20.9% in 2008.
Asked if the performance-linked funding component might influence training providers against enrolling young students at risk of dropping out, Mr Ker said he did not believe so.
"I don't think any polytechnics will game the system - we certainly will not. It is central to our mission that we provide good pathways for learners, starting at the lower levels. And it is good business for us to do so."
However, Mr Ker said he wished the new system rewarded providers who exceeded the performance targets with additional funding.
"As it stands, no-one gets rewarded for performing well; they just do not get punished ..."