Military bosses are stopping more redundancies because the first stage of reforms was so damaging and traumatic that staff morale slumped to its lowest and the Defence Force struggled to retain its best people.
But Vice Chief of the Defence Force, Rear Admiral Jack Steer, appears to have told politicians before telling Defence Minister Jonathan Coleman, who says final decisions have not been made.
And it has emerged that during the restructure, two navy officers each pocketed $50,000 in redundancy pay-outs and were rehired in the same roles.
Yesterday Rear Admiral Steer appeared before a parliamentary select committee and bluntly described the impact of "civilianisation", which had seen about 300 redundancies of uniformed staff and about 100 rehired in civilian roles.
The Defence Force is aiming to save $355 million by 2014/15.
Rear Admiral Steer said sending 300 redundancy letters was "one of the hardest things we've done in a very long time", and staff were suffering from "change fatigue".
"It was damaging because our people felt we let them down, that we weren't looking after them, that we broke the social contract."
The attrition rate was 19 per cent - 685 roles were vacated between August 2011 and January 2012 - and staff morale was at its lowest since the Defence Force surveys began eight years ago.
The force is actively recruiting personnel from overseas, including the United Kingdom, though a Defence Force spokesman said this was not a new process.
Rear Admiral Steer said the "trauma" of the first round meant there will be no redundancies in the second round, which will consider 130 specialist positions.
"We will be using natural attrition and end of contracts to get the numbers down. Given our challenge with attrition at the moment, I don't see a further phase of civilianisation, because it's just too damaging at the moment.
"What we need to do is stabilise our attrition, improve our morale and then reassess where we stand."
His comments appeared to catch Dr Coleman off guard.
"No final decisions have been made on that second tranche of civilianisation. I'll have to see what [Rear Admiral Steer] has said, but no final decisions have been made."
He said he did not think the Defence Force had been pushed too far.
"There have been high attrition rates, but at the same time there have been people lining up out the door to join the Defence Force.
"Overall I think it's gone pretty well."
Under questioning in the committee from Labour MP Phil Goff, Rear Admiral Steer revealed two navy officers had been made redundant and were rehired; one was on an evaluation team, the other head of the youth development unit.
"You could say we made a mistake," he said.
Defence Force staff had effectively had a wage freeze for almost four years, and Rear Admiral Steer said that could not continue if they wanted to retain the best staff.
"There's still a long way to go. Am I confident of making $355 million [by 2014/15]? Yes. Will it be easy? Definitely not."By Derek Cheng Email Derek