Deputy Mayor Aleisha Rutherford said she was hearing from people frustrated with delays in repairs and maintenance, and call centre wait times, because the council was understaffed.
Staff were going to other organisations as the council had a wage lag that had not been addressed.
"This is an opportunity for us to draw a line in the sand and say actually if we want to achieve the vision we have set then we are going to put the right budgets in place and that is not just on physical resource but that is on our labour force as well.
"Our people are our most valuable asset and so I am absolutely not supporting any decrease to what is proposed with remuneration review."
Rutherford said week after week she heard about people leaving to do a similar role in another organisation or government department with much higher wages because the council could not keep up.
Dyhrberg said reducing the proposed remuneration budget would be counterproductive as the council was spending money on consultants to make up for the vacancies.
Wages were going up so fast that when the council increased them it was already out of the market.
An example was the council's efforts to attract engineers, Dyhrberg said. "Our wages that we pay aren't high enough to meet the thresholds to employ people from overseas because we are not paying enough to meet the visa thresholds so we have to address those."
The increased budget was needed to address recruitment and retention issues and to maintain service levels because "our people can't go on forever like this".
Cr Vaughan Dennison said he recognised the wage lag and wage pressures in the market but did not believe the council would fill all the positions on the first day of the new financial year. There would be a lag of appointments throughout the year so he would support Naylor's recommendation.
Cr Susan Baty agreed with Dennison that the council would not be able to fill all the roles immediately, but the 120 empty seats talked about were not empty. Contractors were being used for positions not permanently filled. "Contractors cost us three times the cost of a permanent position."
She had bumped into former staff who had been poached from the council and were now getting $30,000-40,000 more a year. "We are setting up the council to fail if we don't put this budget in."
The $2m budget cut was narrowly supported, eight votes to seven.