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More investment needs to go into the country's universities if they're to move higher up a list ranking the world's institutions, the head of Auckland University says.
New Zealand universities have failed to rank among the world's most prestigious 100 institutions as rated by top international scholars.
The Times Higher Education reputation rankings, released today, were based on the world's largest invitation-only academic opinion survey.
The rankings showed American and British universities remained highly rated by top scholars, while Asian universities were becoming increasingly well-regarded.
New Zealand had never rated in the top 100.
The top-ranked New Zealand university, the University of Auckland, had slipped from about 150 to about the 200 mark.
Vice Chancellor Stuart McCutcheon said it was a "concern" that universities here were slipping down the rankings.
"The main thing that correlates with rankings is the level of investment that a country makes in its university systems."
Universities here operated with the lowest income or expenditure per student in the world, which was a problem in resourcing, Professor McCutcheon said.
Five Australia universities made the top 100 list.
"What you find is the Australian universities have a higher level of government investment, they have higher levels of student fees, they have higher levels of research funding, they have higher levels of industry investing in research in the institutions, they have higher levels of philanthropy."
The rankings also affected how many overseas students were attracted to universities here, Professor McCutcheon said.
"So it's a serious business."
Labour Party spokesman for Export Education Raymond Huo said New Zealand was competing with the United States, the United Kingdom, Australia and Canada in wooing overseas students.
The sector added $2.6 billion annually to our economy, creating jobs and establishing vital cultural and business links, he said.
"If we see another drop in student numbers this year the sector will feel the pinch more," Mr Huo said.
Tertiary Education Minister Steven Joyce said universities needed to face challenges including attracting more international students, expanding research links, and investing more in disciplines where they had a competitive advantage.
"The Government has increased its investment in universities by 16.5 per cent over the last four years, despite tough financial times. The annual income of New Zealand universities was nearly $500 million a year higher in 2012 than it was in 2008," he said.
A drop in the number of international student over the last few years was due to the impacts from the Global Financial Crisis and the Christchurch Earthquakes, he said.
The Times result comes after five New Zealand universities were ranked among the world's top 50 institutions, by discipline, by another British ranking company.
The QS rankings, released last month, rated the University of Auckland as the country's best-performing institution.
The University of Canterbury, University of Otago, Massey University and University of Waikato also got top-50 mentions within disciplines.
The world's top 10 universities
1. Harvard Harvard University (US)
2. Massachusetts Institute of Technology (US)
3. Stanford University (US)
4. University of Cambridge (UK)
5. University of Oxford (UK)
6. University of California, Berkeley (US)
7. Princeton University (US)
8. Yale University (US)
9. California Institute of Technology (US)
10. University of California, Los Angeles (US)