The OECD report, Next steps for public spending in New Zealand: the pursuit of effectiveness (Working Papers No. 337), released in August, says evidence showed that the returns from earlier education — such as going from no education to gaining School Certificate — were significantly higher than the returns at tertiary level.

Shifting funding to this earlier area and to early childhood education could help lift school completion rates among minorities, author David Rae says in the report.

The report said New Zealand tertiary enrolment levels were already very high and international and local evidence showed that enrolment rates were not significantly affected by study costs if loans were available. While it was difficult to estimate precisely how much students should pay there was still room for them to pay a greater share before costs outweighed benefits, evidence suggested. Therefore, there may be a payoff from shifting resources to earlier education, the report argued.

New Zealand had been a world leader since the mid-1980s in public management reforms and the contracting out of services but education was one area where central control was still prevalent.

“The government should look for more opportunities to extend the current flexibilities so that more emphasis is given to underachievers, the area where it is needed most,” the report said.

“These include opportunities to provide for greater differentiation of teacher pay on the basis of demand and performance, and greater opportunities for schools to manage their property resources."

Giving parents the ability to choose the schools their children attended would also help improve outcomes.

The government had reintroduced zoning in 2000 partly because it was concerned about students being left behind in "downwardly spiralling schools” but evidence suggested the concern was overplayed.

An unusually high share of the spread in student performance occurred in schools rather than between them, suggesting the problem lay with the system or with problem children but not the schools themselves, as the table below illustrates.

Student performance variation in OECD countries (from the OECD PISA study, 2001)

The quality of spending could also be improved by a greater willingness to extend the use of market-based mechanisms, including user charges, competition and choice, not only in education but also in the health sector, the report said.

Education Forum chairman John Morris said the OECD report provided valuable data to help strengthen policy debate. It also backed up findings in an Education Forum report that is to be published in November.

Somebody is going to pay for this: tuition fees and tertiary education financing in New Zealand, written by Forum policy adviser Norman LaRocque, argues that a shift in funding from higher to lower levels of education would better assist the government in meeting its policy objectives.