Students, universities and other training institutions say lack of spending on tertiary education will lead to less opportunity for study, academics leaving for better money overseas and leave the country less able to respond in an economic recovery.
They have voiced concern the Government hasn't followed Australia's example of increasing tertiary education funding.
The Government's budget today allocated a total of $2.78 billion in 2009/10, up from a 2008/09 baseline of $2.66b.
Tertiary students themselves said they were disappointed the main funding categories in tertiary education will not be guaranteed to increase in real terms over the coming few years and that $98 million dollars worth of scholarships will be slashed.
The increased spending in the tertiary education budget for 2010 was below predicted inflation levels and was effectively a cut, said Jordan King, co-president of New Zealand Union of Students' Associations.
Less funding meant fewer people able to access tertiary education.
"The last thing we need is to emerge from this recession with an even less skilled workforce," he said.
Cutting the funding supporting academic salaries in universities would have major ramifications for the future of research and learning in New Zealand, said Tertiary Education Union national secretary Sharn Riggs.
Recently Australia responded to the global recession by investing over $A5 billion ($NZ6.38billion) in tertiary education and the United States has invested over $US30 ($NZ49) billion.
Cutting tripartite funding combined with other countries' investment programmes in tertiary education meant that New Zealand universities might not be able to address the pay disparities internationally, she said.
Cutting money from so many important numeracy, literacy and skill enhancement initiatives was also a poor decision.
The NZ Vice-Chancellors' Committee said it was also concerned New Zealand did not follow the example set in the recent Australian budget which invested heavily in university infrastructure, teaching and research.
Committee chairman Roger Field said the Government has anticipated some growth in university enrolment without providing commensurate funding, while funding commitments for university salaries have been reduced.
Savings achieved through reduced tertiary education compliance costs and cuts in bureaucracy should be reinvested in the sector, he said.
Meanwhile, the budget flew in the face of the Government's own statements recognising the importance of industry training to help the country through the recession, the Industry Training Federation said.
Executive director Jeremy Baker said Prime Minister John Key, at his own job summit, stated he was keen to determine what could be done to keep up or increase levels of industry training during this recession.
"Today the Government formally responded by in effect cutting funding to industry training while passing on significant increases in funding to polytechnics and universities whose qualifications cost the taxpayer around three times as much as the industry training sector and often contain only a tenuous link to the country's economic and social needs," Mr Baker said.
