The Prime Minister has signalled there will be further tightening up of the public service this year.
John Key has delivered his statement to Parliament on Tuesday afternoon as the House begins its business for 2011.
Mr Key says since coming to office, the National-led Government has reduced the number of full-time equivalent staff positions in the core government administration by 5%.
He told Parliament there is more to be done to make government bureaucracy smaller and better.
"There are 80 Crown entities all with their own boards, 38 government departments, 70 portfolios, 60 separate budget votes. We are by international comparison, Mr Speaker, bloated and and inefficient - so there has to be change."
Mr Key says this year, and in years to come, the public should expect to see more back-office savings initiatives and more mergers of agencies and functions.
But Labour Party leader Phil Goff was scathing of Mr Key's speech, telling MPs it is one of the worst he has heard.
"That was a do-nothing speech from a do-nothing government that has sat on the sidelines while New Zealand has gone backwards."
Finance Minister Bill English will provide more information in the coming weeks about the continued reform of the public service.
The Public Service Association on Tuesday rejected Mr Key's claim that the public service is bloated and inefficient.
PSA secretary Richard Wagstaff says Mr Key is aiming at voters in an election year but the public service in New Zealand is no bigger than those of comparable nations.
Mr Wagstaff says the union would support some changes, such as merging agencies to save costs.