The announcement follows the National Party's revelation in June that it had been leaked parts of a "draft" Cabinet paper that described the Government's proposed reforms of the tertiary sector.

The prospect of a merged polytechnic entity sparked outrage from National's Tertiary Education spokesperson Dr Shane Reti, who warned that "more than a thousand jobs will be lost".

"The polytechs will be controlled by a head office. They will have their cash and community legacy assets ring-fenced at head office. All other assets, including buildings and land will be taken away and consolidated," he said at the time.

The proposed merger was first floated by Hipkins last year when he told Newshub Nation in August that polytechnics across the country would likely have to merge or shut down due to low enrolment numbers.

Hipkins said on Thursday nearly nine out of 10 Kiwi businesses are not training through industry training. Yet at the same time, 71 percent of employers say there is, or will soon be, a skills shortage in their industry area.

"No one thinks the status quo works well for New Zealanders. Except National, which tinkered around the edges and stood back while polytechnics struggled," he said.

"This Government was forced to step in and bail several polytechnics out with $100 million, and we know without significant change, things will keep getting worse."

Hipkins said last year the Government would have to make significant investment just "to keep the [polytechnic] sector afloat". West Coast Polytechnic Tai Poutini, for example, received a $33 million bailout.

But not everyone will be pleased with the vocational education shakeup. Garry Fisseden, CEO of The Skills Organisation, spoke out against the proposal to replace industry training organisations.

"Through close relationships with thousands of employers and trainees, ITOs (Industry Training Organisations) have an essential part in bridging the communication gap between industry and learning institutions."

Hipkins said he's given a "great deal of thought" to how to minimise disruption. He said he's "listened carefully to the concerns" of employers, staff and students.

The key changes announced:

Around four to seven industry-governed Workforce Development Councils will be created by 2022 to replace and expand most of the existing roles of industry training organisations

The 16 institutes of technology and polytechnics will be brought together to operate as a single national campus network

New Regional Skills Leadership Groups will represent regional interests and will work across education, immigration and welfare systems in each region

Over the next two to three years, the role of supporting workplace learning will shift from industry training organisations to training providers

Centres of Vocational Excellence (CoVEs) will be established at regional campuses

Māori will be included as key partners, including through Te Taumata Aronui, a Māori Crown Tertiary Education Group

Newshub.