Chief financial officer Sharon van Turnhout said the university was ''continuing to face considerable cost increases'' and a challenging student recruitment environment.
''In the past the university was able to grow its income base by increasing enrolments, which is financially beneficial as the marginal cost of one additional student is generally low.
''This is more difficult in the current capped, low-growth environment for domestic students.''
At a university council meeting yesterday, the fee increase was supported by 10 of 12
members in attendance.
Ms van Turnhout said factors including income from international students, fiscal targets and fees being charged by other universities offering similar courses were considered when setting domestic fees for 2017.
Otago University Student Association president Laura Harris acknowledged the increasing costs the institution was facing, but opposed the move. ''I will never vote for increases in student fees,'' she said.
International fees in master of business administration and postgraduate diploma in business administration programmes would increase by 4.8% on 2016 fees.
At present, 15-point papers cost $2625 and 60-point project and elective offerings cost $10,500.
The council also moved to increase the 2017 student services fee by 1%.
Next year students will pay $739, or $7 more than. The increase would contribute to an extra $170,000 which would fund mental health services for students at the Dunedin campus, Ms van Turnhout said.