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Prime Minister Helen Clark will on Monday announce government funding of $12.5 million to start the project.
Miss Clark is scheduled to be in the city on Monday visiting the University of Otago, where she is expected to make a "significant" announcement about student funding.
Otago Daily Times sources confirmed yesterday that the $12.5 million in government funding would be nearly matched by the University of Otago.
The money will be used to buy the former Wickliffe Press site, which has frontages on to Clyde, Albany and Forth Sts.
It sits on the southern edge of the university's main campus and is only a few minutes' walk from the university-owned College of Education and Otago Polytechnic campus.
The property is owned by the Dunedin City Council, which bought it from Wickliffe Press in 2003 and leased it back to the company.
Dunedin North MP Pete Hodgson has been working on the project for years and the announcement will be a boost for both him and the city.
A three-storeyed building is likely to be built on the site, with the Otago Institute of Design taking a floor.
Work on the initiative be-gan more than two years ago when representatives from the university and polytechnic approached the Otago Forward board seeking support for the project so they could get New Zealand Trade and Enterprise funding.
Countries such as Finland had focused on design institutes for many years and, as a result, many international companies consulted with them when they wanted help to design a new product.
When Fisher and Paykel Appliances closes its Mosgiel plant, it will leave behind in the city its design arm.
That arm might be accommodated in the institute.
Miss Clark will launch Labour's election campaign in Auckland tomorrow, just after National Party leader John Key launches his party's campaign in the same city.
Act New Zealand and United Future will also launch their campaigns in Auckland tomorrow.
Design institute forcity to be announced> From Page 1Students are expecting some help with either a universal student allowance or some adjustment to tertiary fees and the Otago University Students' Association is tipping a packed common room of up to 500 students when Miss Clark speaks there on Monday.
With a weekend poll expected to show a substantial closing of the gap between Labour and National, as did the TV3 and New Zealand Morgan polls yesterday, an announcement to help students, or their parents already struggling with higher energy, fuel and food costs, could be an election game breaker.
New Zealand First leader Winston Peters, Labour's support partner from the last election, has already released his policy, calling for a universal allowance.
United Future leader Peter Dunne, who is also revenue minister, will tomorrow announce his "zero fees" policy for tertiary education in New Zealand from 2010.