The head of Victoria University says giving allowances to all students will extend a growing imbalance between funding for students and funding for tertiary institutions.
Vice-chancellor Pat Walsh says Labour's promise to phase in universal allowances puts New Zealand further out of kilter with other OECD countries, which spend on average 18% of their tertiary budget on financial aid to students, compared to 42% in New Zealand.
Professor Walsh says that has already led to universities being underfunded by about $230 million a year.
He says all vice-chancellors support having university education that's affordable, but it must also be of high quality.
Professor Walsh says if universities continue to be underfunded, the quality of the education they provide will be compromised over time.
Labour's Tertiary Education spokesperson Pete Hodgson says the claim that 42% of tertiary funding goes on financial aid for students is misleading.
He says that figure includes student loans which have to be repaid, and after adjusting for borrowing the figure 23%.
Listen to Professor Pat Walsh
Student group sceptical of allowance pledge
Victoria University Students Association president Joel Cosgrove is sceptical about the Labour Party's commitment to a universal student allowance.
The Labour Party has promised to abolish parental income testing on student allowances by 2012, gradually phasing out the testing starting in January 2009.
Joel Cosgrove says few students qualify for the full allowance of $180 per week because it is hard to meet the criteria, though he says the plan would help students meet their costs.
However, he says it has taken Labour more than a decade to produce a timetable for universal allowances it promised in the mid 1990s.
The Auckland Students Association has described Labour's announcement as a catch-up, and says that leaves only the National Party without a similar policy.
The Union of Students Associations says rising costs mean many families cannot support their children's studies.
Co-president, Paul Falloon says a third of New Zealand's 200,000 full-time tertiary students rely on loans, and many of those with high debt go overseas when qualified, to get higher paying jobs.