The Government says a major revamp of the Ministry of Foreign Affairs and Trade will make it a modern, leaner and more adaptable agency.
In a speech on Tuesday, Foreign Affairs Minister Murray McCully warned there would be no budget increase for the ministry over the next few years.
He says it can only open new missions by dramatically changing the way it does business and altering the size of diplomatic posts.
Mr McCully says it should use fewer seconded staff, but rather more local people and New Zealanders who already live abroad.
Diplomatic positions will be open to competition from private sector candidates.
But opposition parties warn diplomatic services will be cut, and New Zealand will lose its independence by housing sole ambassadors in the embassies of its allies.
Value for money needed
Mr McCully has also reiterated the need for overseas aid programmes to be value for money, particularly in the Pacific.
The minister said the $62 million it cost to administer the Government's $500 million dollar aid budget was too high.
He has signalled a continuing emphasis on economic development and trade on its programmes in the Pacific, saying New Zealand is yet to see efficiency in its aid expenditure.
Mr McCully says New Zealand has had some successes in its bilateral programmes, but challenges remain.