Class size would stay the same for new entrants, at one:15.
Years two to 10 ratios, which ranged from 1:23 to 1:29, would be moved to 1:27.5. Student teacher ratios for students sitting NCEA exams in years 11-13 would be standardised at 1:17.3 instead of 1:17 and 1:23.
Some $60m would go to boosting teacher recruitment and training over four years, said Ms Parata.
"We will collaborate in the development of an appraisal system on driving up quality teaching and quality professional leadership.
"Performance pay is but one of a basket of options to reward and recognise that.''
The Government would not invest in more teachers but would direct funding to increase the quality of teaching.
Teachers would now be required to have a minimum postgraduate qualification to train.
A qualification for prospective principals was also announced.
New Zealand Principals' Federation president Paul Drummond said a move to implement performance pay for teachers "misses the point''.
"Performance pay would be counter-productive to quality teaching, because it would destroy our culture of healthy collaboration. It is the wrong incentive,' he said.
"In primary schools team teaching and collaboration are common practice. It would be impossible to try and calculate each teacher's individual input to any particular child's achievements, and why would you?''
Mr Drummond said it was impossible to measure where a teacher's influence started and finished.
"Who would get the credit for the achievement of the eight-year-old boy who has suddenly switched on to reading? The new entrant teacher who instilled the basic knowledge of books, or the Kapa Haka teacher who instilled a sense of identity and a reason to come to school?''
Secondary Principals Councils chairman Allan Vester said he didn't believe performance pay for teachers would address low achievement in students.
"I don't think anyone is going to be arguing with the idea of trying to improve teacher quality but performance pay is fraught with issues at a secondary school level, and the performance of students at lower socio-economic economic schools could be reduced by performance pay.''
President of primary education union NZEI, Ian Leckie, said the decision to increase class sizes would have a severe impact on the quality of education in primary schools.
"All parents know that young children thrive when they have better one-on-one time with teachers. So how does a reduction in the number of teachers in our schools and the creation of bigger class sizes result in better outcomes?"
Both teachers' unions say the proposed changes to education in next week's Budget are a direct hit to frontline teaching staff.
Vice president of the Post Primary Teachers' Association Angela Roberts said an increase in class size would mean a $43 million cut to front-line teaching staff.
The Green Party and the Labour Party were equally critical of an increase in class size and the introduction of performance pay.
"These cuts are a consequence of skewed priorities and National's failure to properly manage the economy or create growth,'' said Labour education spokeswoman Nanaia Mahuta.
Green Party education spokeswoman Catherine Delahunty said evidence did not support the rise in class sizes, and children did better in smaller classes.
ACT Party president Chris Simmons disagreed and said the moves had been a long time coming.
"In Australia, the Labour Government has recently established performance-based pay bonuses with the first payments to teachers expected in 2014,'' he said.
South Australian teachers would have to meet set standards of knowledge, skills and practice to qualify for pay rises, rather than being awarded automatic pay rises per year of teaching.
The latest Herald DigiPoll survey found 63 per cent of respondents supported performance pay for teachers.
