An additional 3,423 full-time staff and contractors are required to fulfil commitments the Government made in this year's Budget, released on May 19.
The Treasury estimates this will see the public service workforce grow by 6 per cent.
This is more than the average annual growth rate of 4.1 per cent over the past decade, and 4.6 per cent over the past six years.
If Government ministers had all their Budget bids fulfilled, an extra 7,887 staff would've needed to have been hired.
The Treasury, in a report presented to Government on February 4, said demand for staff was so high because "significant reform programmes and new functions being established have created public service workloads that exceed business as usual delivery for many agencies".
A lot of work is underway to amalgamate the country's district health boards, upgrade water infrastructure, and use public funds to help businesses reduce their carbon emissions. Covid-19 is of course also continuing to require resources.
Finance Minister Grant Robertson said he only okayed just over 40 per cent of the staff increase requests he received, when he underwent the usual sifting process required to put together a budget.
However, the Treasury, in a February 25 briefing, warned hiring 3,423 staff when the labour market is as tight as it is, will still create competition, which is "likely to contribute to wage inflationary pressures", including higher consultancy costs.
It said government agencies will compete for a limited workforce, particularly in the policy, IT, regulatory and inspector spaces.
It noted there is particular demand for climate and Māori policy advisers. It said the border opening could create some capacity in the IT space, even though IT experts are in hot demand globally.
The Treasury also identified two initiatives that will require a lot of staff: a Statistics New Zealand project to gather "sustainable data" (117 full-time equivalents) and inter-agency work aimed at addressing family and sexual violence (91 full-time equivalents).
It feared the Government risked failing to deliver on all its commitments, so advised it to do more to prioritise its work programme.
The Treasury suggested the Government put a ceiling on the number of additional staff required for Budget 2022 to ensure it could deliver on commitments made.
It said this "workforce constraint" could "act as a guide for the maximum number of additional workers we think the labour market could realistically deliver".
Robertson said capacity constraints and the inflationary outlook are considered when assessing budget bids.
"The pandemic has resulted in a shortage of skilled workers, not only in New Zealand. However, we also need to hire experts to make sure the work we are doing in important areas like climate change is driven by the best possible advice," he said.
Robertson said the Government is confident there's enough capacity in the economy for Budget commitments to be delivered without crowding out the private sector and causing inflation.
"The Treasury did conduct value-for-money assessments on all bids," he said.
"The agency is also forecasting that our economy will continue to grow over the forecast period, with a return to surplus in a similar time to what National took after the Global Financial Crisis while our debt levels are some of the lowest in the world. Government spending as a percentage of gross domestic product is set to reduce over the coming years, reducing capacity pressures in the economy."
National Finance spokeswoman Nicola Willis supported the Treasury's suggestion to have a "workforce constraint" but said it should only be for "back office" roles, including policy, human resources and communications staff.
"There is a widespread view that the Government's insatiable appetite for hiring new officials has added to current worker shortages, making it hard for many businesses and community organisations to retain and recruit staff as they're forced to compete with a taxpayer-funded Government recruitment drive," Willis said.
"The danger here is that the Government is so busy hiring staff for its own pet projects that businesses miss out."
