The Government is being accused of taking a slash and burn approach to spending after Finance Minister Bill English signalled cuts to public services and new figures showed substantial job losses in the sector.

Mr English yesterday warned the Government intended to hasten public service reforms, and some public services, which he dubbed "nice-to-haves", were likely to be cut.

"Something has to give, and that has to be lower-value activities the government is currently funding," he said.

Labour leader Phil Goff said the Government was preparing the electorate for cuts.

The Government indicated Working for Families would be limited to people on incomes lower than $100,000 but Mr Goff thought that was a starting point.

"They can only make significant savings if they cut into the incomes of families where each (parent) would be on average be earning less than the average wage, currently around $50,000.

"That means hammering people on middle incomes with at least a couple of children to support and high mortgage or rental payments."

KiwiSaver and interest-free student loans were also under threat, he said, despite election promises they would be retained unchanged.

"Of course, they also promised not to increase GST and 'to cap not cut' numbers in the public service."

State Services Minister Tony Ryall today released the fourth six-monthly update on the Government's cap on core government administration numbers. About 2000 full-time jobs had gone but more workers were on the front-line, he said.

"We have more than 300 additional frontline police officers, around 1600 extra teachers in our schools, over 1000 more nurses, and more than 500 extra doctors working in our public health service," Mr Ryall said.

"The Government is determined to see better results from public services and expects that resources are shifted to the frontline services where they are needed most."

PSA national secretary Brenda Pilott said the cuts had left public service morale as low as she had ever seen it.

Workers were now stretched to the limit and more job losses would mean cutting Government services, she said.

"They've seen the axe fall and the question is whether it will fall on them next. They're questioning - am I going to have a job by Christmas?

"It's just not possible to cut any further without services suffering. We're now at a tipping point. We're talking about cutting services to New Zealanders.

"As the Canterbury earthquake clearly demonstrated, frontline services don't get delivered to the right place at the right time without the support and expertise of those working behind the scenes."

Many of those who had already lost their jobs were either on the unemployment benefit or working for overseas Governments, said Ms Pilott.

She called for Finance Minister Bill English to reveal how many state sector jobs would ultimately go.

"What is the plan? Is it to drop to 30,000. To 25,000?

"It's time to come clean. How small is small and what figure of job cuts is the government aiming at?"

Paul Goulter, national secretary of the primary teachers' union the New Zealand Educational Institute, said teacher numbers had increased on a teacher-to-student ratio basis.

"However, money to fund the lower ratios policy had already been set aside and has nothing to do with redirected money from what amounts to massive public service cuts," he said.

"Manipulating the figures to sweeten up the public on its agenda to slash the public service is mischievous on the Government's part."

He was worried Education Ministry staff who worked with special needs children would fall victim to cuts.

Public Service Association national secretary Brenda Pilott said cuts to administration would impact services and a tipping point had been reached.

"Public sector workers have been working longer and harder with fewer resources for some time. Despite the extra hours and efforts on their part the shortfall eventually impacts on services."

The latest figures reflected restructures at the Ministries of Health, Environment and Agriculture and Forestry, which resulted in significant job losses.

"This is cutting, not capping."

But the Wellington Employers' Chamber of Commerce chamber chief executive Ken Harris said welcomed the figures, despite a likely short-term negative impact on the local economy.

"With creative thinking, efficient Government services can become a competitive advantage for Wellington and New Zealand.

"The alternative of higher taxes and the employment of too many public servants is unacceptable. Higher taxes sap the ability of business to support a sustainable community and diverting talent away from the private sector creates skills shortages. "