The Defence Force is losing hundreds of staff to Australian mining companies as low morale leads 40 per cent of personnel to consider a career change.
Defence Force chief Lieutenant General Rhys Jones revealed that the mining industry was recruiting in Devonport, home of Auckland's naval base.
Navy staff were being targeted because of their experience with heavy machinery, and departures to Australia were one of the reasons the Navy's attrition rate had climbed to 22.3 per cent.
Lt Gen Jones said Defence Force numbers often fluctuated, but departures had increased during tough economic times.
The force could not compete with mining salaries, which were often twice as large as those in the military.
The Air Force, Army, and Navy had lost 1000 people in the past two years, and a "high proportion" had gone into mining.
The Navy had cut back on exercises at sea because of low staff numbers, and was prioritising its patrols for busy periods, such as in fishing season.
Staff were also moving to the Australian Defence Force.
"We have agreements between all the militaries where you can't actively go an headhunt someone who's serving in here," said Lt Gen Jones.
"But of course all the militaries can advertise what their conditions of service are, and they can tell people, 'Hey if you want to leave the NZ Defence Force, come and talk to us'."
The Defence Force could still handle disaster relief, but it could struggle to sustain a large operation.
"Another East Timor, of 2000-2002, when we were putting 1000 people in operations, would strain us."
A survey of the Defence Force given to a parliamentary select committee yesterday showed morale had been falling since early 2009.
More than 40 per cent of staff intended to leave, up from 27 per cent in mid-2009.
The Defence Force was being restructured, including job cuts, to save $400 million by 2014/15.
Lt Gen Jones said the force was working hard to improve the quality of life for its staff.
"What we do try to focus on is still maintaining a very positive work environment where people feel valued."