Finance Minister Bill English is defending the timing of further cuts to the public service amid warnings it may ultimately be bad for the economy.
Mr English announced on Tuesday there will be more consolidation of departments and agencies over the next two or three years, with fewer positions in core government administration.
He said he has no master plan but with 38 departments and more than 150 Crown entities there is too much duplication in the public service, and details will be released as decisions are made.
The chief economist at research firm BERL, Ganesh Nana, says the cuts should be made when the economy is strong and public servants have somewhere else to go to get another job.
But Mr English told Morning Report the Government has borrowed money as the need has arisen - but when it reaches one of the highest deficits ever, it has to turn the situation around.
The minister said the Government is not heading for a major restructure; changes have been moderate and it will continue to focus on long-term gains and trimming back-room costs.
Mr English says though many services will continue to be delivered through government agencies, increasingly, they will also be provided by private groups and the Government is looking carefully at areas where providers compete for contracts.
Ganesh Nana says the cuts risk hurting the Government's accounts, rather than helping them and now is not the time for aggressive action.
Mr Nana says any rebalancing of Government accounts should happen when there is strong economic growth and competition for resources.
Cutting spending risks tipping the economy into a very long period of depressed activity and hurting the books even more, he says.
PSA fears second-class service
The public service union says the next round of public sector cuts signalled by Mr English will condemn New Zealanders to a second-class public service.
PSA national secretary Brenda Pilott told Morning Report there are now fewer public servants doing more work and the situation reached the point where it is not sustainable.
"We hear lots of complaints from members and concerns that people are working in a very tenuous way. Caseloads are growing, hours of work are growing.
"We are at a tipping point and not only are jobs at risk, but I think services and service quality is at risk."
Opposition parties have criticised the Government for signalling it will continue to cut public spending.
The Labour Party's state services spokesperson, Ruth Dyson, says that will lead to cuts not only among back-office staff, but to frontline employees and services also.
The Green Party's state sector spokesperson, Keith Locke, says the public sector should not have to pay the price for economic mis-management by the Government.