Cutting the points available for having studied in New Zealand will reduce the appeal of New Zealand universities relative to those overseas. That scheme is arguably a distortion, if you don’t think that having lived and studied here makes you more likely to have successful outcomes as a migrant to New Zealand. But if it is a distortion, it is a a distortion within a regime that explicitly seeks to subsidise domestic students by charging high fees to foreign students. A first best would do away with the bulk of tuition subsidies but we are nowhere near that world.