The New Zealand Government is to change the law establishing new universities so that any proposal must be in the "national interest", regardless of whether it meets other criteria set out in the Education Act.
The only institution seeking university status, Unitec Institute of Technology, said the legislation was aimed at blocking its bid, although the Government denied this. It may challenge the Government in court. It has sought university status since 1996.
In 2000, the Auckland Institute of Technology - with characteristics similar to Unitec's - became New Zealand's eighth university. The Government promptly introduced legislation to limit the number to eight.
That Bill was quietly shelved, but meanwhile Unitec and what was by then Auckland University of Technology began discussing a merger. The AUT backed out last year, and Unitec revived its application for full university status.
Unitec claims to be a "dual-sector" institution, offering trades and technical training from certificate to doctorate level rather than more traditional research-led university disciplines.
John Webster, chief executive of Unitec, described the tertiary policy as "'deskilled polytechnics' for a deskilled workforce, and perhaps a smaller number of universities to match Education Minister Trevor Mallard's perception of international standards and research-led study".
Mr Webster added: "It's not a very realistic prescription for a system that has to provide a workforce for an increasingly complex economy."
The Vice-Chancellors' Committee has applauded the Bill. Chairman Stuart McCutcheon said: "One of the problems in international markets, especially in China, is the tendency to regard all institutions as pretty much the same."