It's time for major change in the public sector, Finance Minister Bill English said yesterday.
Chief executives were told to come up with ways to deliver better services with little or no new money.
"We gave them time to do that - we're now at that point," he said in a speech to the Auckland Chamber of Commerce and Massey University at Ellerslie. "That means we will see quite a change in how public services are delivered."
Prime Minister John Key is expected to give more details next month but has already hinted at more use of technology, as well as mergers of agencies and greater savings.
About 3000 public service jobs have been lost since National won office in 2008 and more are expected to go, particularly as the superannuation policy announced in the Budget takes effect.
All state sector employers will have to fund their employees' super and KiwiSaver contributions, instead of having them paid centrally by the State Services Commission, which in 2010 cost $165 million across the public sector.
The education sector must find $63 million extra; for district health boards it is $46.5 million in 2012 to 2013.
Mr English told his audience the Government could no longer keep spending in order to absorb the shocks from the global financial crisis.
"We made it clear this could not continue forever. At some point the Government would have to tighten up its spending and stop the increase in public debt."
Between 2000 and 2009, core Crown expenditure climbed by about 85 per cent, from $35 billion to $64 billion.
It has risen by $7.4 billion since then and in the current financial year is tipped to weigh in at $71.4 billion.
Addressing the Government's plan to raise $5 billion to $7 billion through State Owned Enterprises minority share floats, Mr English likened the alternative to the Greek debt crisis.
"Our political opponents need to honestly explain ... why it would be better to borrow this five to seven billion from overseas lenders at a time when the world is awash with debt and consequent risks.
"Most nights on television we see the consequences of countries in Europe ... borrowing too much. We don't want that for New Zealand."
The Government was spending and borrowing more than it could afford into the future. So it made sense to reorganise the Government's assets and redeploy capital to priority areas without having to borrow more.