Education Minister Chris Hipkins says polytechnics across the country will likely have to merge or shut down due to low enrollment numbers.
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Speaking on Newshub Nation Saturday morning, Mr Hipkins said he won't preempt ongoing discussions but foresees 'big changes' for the polytech sector.
"I expect there will be fewer polytechs at the end of this exercise,' he said.
While Mr Hipkins says he has received 'anecdotal reports' that polytechnic enrollment numbers are up in the mid-term, that won't be enough.
"Stabilising participation numbers for the polytechnics sadly isn't going to be enough, there's going to need to be much more significant change there.
"There are 16 polytechs in New Zealand and collectively they add up to about the same size as the University of Auckland."
Mr Hipkins says the government will have to make significant investment over the next 18 months just 'to keep the sector afloat'.
West Coast Polytechnic Tai Poutini has already received a $33m bailout this year.
Mr Hipkins stressed the importance of vocational training, saying that the goal of closing or merging polytechs would be to the benefit of students in the long run.
"We need to have a strong vocational education system in New Zealand, particularly in the regions,
"I hope that we'll actually have a better vocational training system at the end of it."
Cabinet papers estimate 80 percent of polytechnics will be making a loss by 2022 on current enrollment figures.
Watch the video for the full interview.