New Zealand universities must specialise, reduce academic tenure, and make students contribute to tuition fees to cope with funding cuts and shifting demand for courses, according Otago University vice chancellor Graeme Fogelberg.

Speaking to a conference in Wellington this month on the structural and financial challenges in higher education, Dr Fogelberg outlined his blueprint for the future of higher education.

"If we are to have flexibility with our salary base, it is clear that we can no longer offer such a high proportion of tenures. We will have to move to more contract appointments."

Students would probably have to pay towards their tuition fees to help bridge the gap left by the government funding squeeze, which, he suggested, would deter low-income groups from going to university.

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Subjects with few students or of diminishing popularity, such as European languages, could be under threat. "There has been an increase in demand for Asian languages," he said.

Dr Fogelberg said there should be predetermined class sizes for a course to be offered. "My expectation would be that the class will be larger, say 30, at first-year undergraduate level than at say fourth-year honours, where, if possible, a class of three or four students can be justified."

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Stephen Town, chief executive of Wanganui Regional Community Polytechnic, called for a consideration of more radical policies, including a voucher funding system, that would place greater emphasis on the student.

He floated other ideas including a flat per-student subsidy attached to the student and which institutions would receive when the student enroled.