Opposition parties are blaming government cost-cutting for the botched Defence Force restructuring which they say has caused unprecedented damage to morale, and academics agree that the savings have been too much too soon.
“This isn’t just a question for New Zealand, it’s also for Australia and others, because we took what was already a fairly lean defence force and expected pretty significant savings and economies from it and efficiencies, we’re actually testing that proposition much more than other countries are,” says Professor Robert Ayson, the head of Victoria University’s Centre for Strategic Studies.
Defence Minister Jonathan Coleman admits "some things could have been done better" but says it wasn't an overall failure and significant savings were made.
Auditor-General Lyn Provost on Wednesday condemned the way 1400 military positions were turned into civilian roles.
She says the process was rushed, its impact on military culture was misjudged and far less was saved than had been anticipated.
Ms Provost says in her report the force started the process without even knowing how many military and civilian positions it would need and it was left so short staffed it couldn't do its job.
Labour's Phil Goff, a former defence minister, says the Government's demand for savings of $400 million a year was the direct cause of the shambles.
"Reorganisation to meet that demand has caused unprecedented damage - morale plummeted to unparalleled levels and attrition has risen to 21 percent - double the figure when National took office," he said.
NZ First's Richard Prosser says it's a damning indictment of government policies.
"Attrition rates are reaching unsustainable levels... defence is a core element of government responsibility and requires more funding," he said.
"We are not pulling our weight with the Australians and the Singaporeans and this government simply does not take this matter seriously enough."
There are concerns New Zealand will no longer be in a position to mount large military missions.
“We’re in a situation where we’ve always got a post-deployment defence force, but it’s very fortunate that should be the case because I think the Defence Force would find it even harder today then it did in earlier years to sustain major deployments, let alone simultaneous ones,” says Mr Ayson.
Mr Ayson also says the changes have had few positives, but have struck morale deeply.
“In terms of the civilisation project, which was really only a small part of those savings, it’s had a big impact on, I think, the organisation in terms of the way that members of the NZDF feel about their employment.”
The chief of the Defence Force, Lieutenant General Rhys Jones, says it has taken on board the Auditor-general's report and changed tack.
"Many within the Defence Force felt we had broken a social contract with them," he said.
Just over 300 military staff were discharged, 87 of them were appointed to civilian jobs and 218 left with redundancy payments.
The project was meant to save $20.5m a year but Ms Provost believes it has cut only $14.2m from the budget.