Defence Minister Jonathan Coleman is disputing the findings of a report into the Defence Force restructuring, and he says morale is now improving again.
Auditor-General Lyn Provost has condemned the way 1400 military positions were turned into civilian roles, saying the process was rushed, its impact on military culture was misjudged and far less was saved than had been anticipated.
Ms Provost says the force started the process without even knowing how many military and civilian positions it would need and was left so short-staffed it couldn't do its job.
Dr Coleman says the report is "old news" and he disagrees with some of its findings.
"It would be more helpful to have some recommendations about how we can look to the future, make the Defence Force more efficient and reach those savings targets," he told Radio New Zealand.
"Defence has acknowledged they could have done civilianisation in a better way, but in the end it actually has been a success because it's freed up money that goes into the frontline, and when you're looking at the number of positions, you're talking about less than three per cent of the Defence Force overall."
Civilianisation had been in back office roles, which meant resources could go to the frontline.
"We're not talking about the SAS or people on our ships now being replaced with civilians," Dr Coleman said.
He admits morale was affected but it is now improving.
Labour's acting defence spokesperson Phil Goff is accusing Dr Coleman of avoiding responsibility for the "ill thought-out" changes.
"It is not 'old news' or 'history' as Jonathan Coleman pretends. The damage is continuing and will take years to recover from. Many of those who have left were highly skilled and experienced, and cannot be immediately replaced," he says.
Just over 300 military staff were discharged, 87 of them were appointed to civilian jobs and 218 left with redundancy payments as part of the restructuring.
The project was meant to save $20.5m a year but Ms Provost believes it has cut only $14.2m from the budget.