However, first-year student numbers increased.
Vice-chancellor Prof Harlene Hayne revealed the figures at yesterday's university council meeting and expressed concern the Government's decision to cut postgraduate allowances could in part be behind a drop in postgraduate research students of just over 100 equivalent-full-time students (EFTS).
The Labour Party's tertiary education spokeswoman, Megan Woods, said the drop in postgraduate numbers showed the Government's allowance cuts were already starting to bite and she called on Tertiary Education Minister Steven Joyce to act quickly to remedy the situation.
A spokesman for the minister said it was too early to determine what impact, if any, the postgraduate student allowances change would have on enrolments.
''I would note that Otago enrolments are soft overall as reported by the university and this would be expected as the economy picks up and more students head into the workforce. However, it stands to reason that there will be some people that choose not to participate in postgraduate study if a very generous student support scheme is made slightly less generous,'' the spokesman said.
Government expenditure on student allowances had increased from $385 million in 2007-08 to $620 million in 2010-11 and was unsustainable, he said.
''As a result, the Government has sought to focus student allowances more on students from low-income families and the early years of study - which was the original intent of the policy.''
Postgraduate students could borrow on the interest-free student loan scheme and, because they had better job prospects and would be better paid, they could pay off their student loan more quickly, he said.
Otago Chamber of Commerce chief executive John Christie played down the impact on the Dunedin economy, saying it would only become a major concern if the trend continued.
Overall, as of the start of last week, there were 408 (2.3%) fewer EFTS enrolled at the university than at the corresponding time last year.
This brings the number to about 17,700. The full-year figure is usually substantially higher because of additional second-semester enrolments.
The drop in postgraduate
student numbers was, Prof Hayne said, ''almost certainly the result'' of students deferring postgraduate study because of ''financial considerations''.
International ''full-fee'' student numbers were down by 105 (9.5%), which Prof Hayne said was largely for reasons outside the university's control, including a drop of about 60 EFTS because a group of Malaysian students had completed their teacher training.
The university was pleased with first-year student numbers, which were 103 (2.9%) up on last year, but numbers of returning students had dropped by just under 200, largely because of tighter entry criteria and academic performance standards.
The university made ''no apology'' for tightening standards and the resulting drop in numbers. That would be good for the university in the long run, Prof Hayne said.
Mr Christie said recent declines would put some pressure on landlords and give students more choice of flats.
A report released by the university last year showed Otago University boosted the Dunedin economy by $779.33 million in 2011 and supported 13,810 jobs, almost a third of the city's workforce.
The report estimated students spent more than $311 million in Dunedin in 2011 and on average each equivalent-full-time student had a ''direct expenditure'' of $17,065.14 a year.
Student numbers at the university have fallen since peaking at 19,918 EFTS in 2010.vaughan.elder@odt.co.nz
