The Government is creating an extra 1000 places for engineering students in 2013.
It will directly fund an extra 700 places and tertiary institutions will have to reprioritise resources to create an additional 300 places for engineering students.
Tertiary Education Skills Minister Steven Joyce said New Zealand does not have enough engineers and trains only half as many as other OECD countries.
In addition to the extra $42 million announced in the Budget this year, Mr Joyce said the Tertiary Education Commission has put in another $8.3 million to make the places available.
He said that should mean New Zealand will be producing an extra 500 engineers a year within the next five years.
The Institute of Professional Engineers says fewer than 2000 students every year graduate with engineering degrees and that needs to lift to 2750 a year to have an economy led by innovation.