Universities are watching enrolments closely as they try to recover from their worst year on record.

The sector last year made its first-ever collective financial loss after a drop in domestic enrolments forced some institutions to cut staff and courses.

The Education Ministry forecast almost no change in domestic university enrolments this year and foreign enrolments were expected to continue rising after dropping during the pandemic border closure.

Universities would not reveal enrolment numbers because enrolments were still open.

However, Victoria University vice-chancellor Nic Smith says it is looking better for his institution, which lost money and cut staff last year.

"We're actually positive this year.

"We're quite positive in our local Wellington region, we're quite positive domestically, and we're also starting to see international students come back and while it's hard to know if they will come back to what were pre-Covid levels, it certainly makes quite a big difference at this point in time given the domestic funding regime," he says.

Nic says the university was expecting a small surplus this year.

AUT vice-chancellor Damon Salesa says his university was also expecting a surplus this year.

"We've got strong positive signals for 2024 but it is very early to tell and because of Covid and the significant changes we've seen in enrolment patterns in the last few years, it's very difficult to do strong year-on-year comparisons and so the best I can say is that signs are positive," Damon says.

Canterbury University tells RNZ its enrolments so far were looking positive while Massey says international students were returning and domestic numbers were "soft" though there had been a trend for students to enrol later than in the past.

Otago would not comment on enrolments but says times were challenging.

Underfunding amid inflation

The early positive signs at some universities followed the Tertiary Education Commission's warning to the government in November 2023 that the sector was under unprecedented financial pressure.

Victoria's Nic says the problem was long-standing.

"I think it's been under stress for actually a very long time.

"We have a system that for the better part of a decade has been funded at half the rate of inflation.

"While that funding envelope has decreased it's put pressure on the kinds of cross-subsidisation that's been used to fund things that might be very important but not revenue generating," he says.

He says universities plugged the gap with international student fees but the pandemic had shown that was risky and no substitute for good government funding.

Damon says Covid amplified the underfunding of universities forcing them to make difficult decisions.

"Universities had to make some decisions about what they could no longer afford to do and so if universities decide not to do something then what's at risk is a capability question and a capacity question.

"So there are risks when you underfund a system," he says.

New Zealanders needed to understand the value universities provided for the economy and society, Damon says.

Meanwhile, the University of Otago says it had made steady progress since April 2023 to resolve its financial challenges but it still had work to do this and next year.

Massey University says like others in the tertiary sector, it had signalled difficult financial conditions and the need to reduce costs and generate income to ensure its financial sustainability.

"This work remains urgent for this year and the near term," it says.

Massey vice-chancellor Jan Thomas says inflation was having a significant effect on domestic student funding rates.

"Government funding, comprising nearly 40 per cent of total income, has not kept pace with inflation.

"In addition to this, Massey has experienced a decline in domestic enrolments after a surge during the pandemic.

"High inflation, low unemployment, and a high cost of living has contributed to the decline in domestic enrolments," she says.