It could take up to 10 years before New Zealand's armed forces are fully staffed, according to the Defence Force annual report.
On July 1, the Defence Force employed 12,893 personnel - up just 40 on the year before.
However, that was the first rise since 1995, when total numbers stood at 16,840.
Personnel numbers had "stabilised" over the past 12 months, said the report for the year to June.
"We continue to face significant challenges with recruitment and retention," Chief of Defence Force Air Marshal Bruce Ferguson said in the report.
"The recovery of personnel numbers will be a high priority over the next three years, although it is recognised that growing the Defence Force personnel numbers to the desired strength with the required skills and experience is likely to take up to 10 years."
He said the three services were implementing "personnel recovery plans" as part of the Defence Sustainability Initiative (DSI) the Government announced in May.
While there were still concerns about attrition and the loss of experienced personnel, particularly from the Army, most trades had met recruitment targets and total attrition had increased only slightly over the past year.
Shortfalls in junior to mid-level ranks ranged from 24 to 40 per cent, the report said.
Air Marshal Ferguson said personnel shortages were continuing because the strong labour market had made it difficult for the Defence Force to compete for and attract quality recruits.
The DSI is set to cost $4.6 billion over 10 years and aims to restore and develop Defence Force resources, including personnel.
Defence Minister Mark Burton was unavailable for comment yesterday.
He said in May after the DSI was released that the Government understood well the challenges of recruitment and retention, which was why it had already funded four pay rises in five years.
Figures in the annual report show how pay rates have risen in the past five years.
In January 2000 a private's average salary was $24,525 and by July this year it had risen to $31,200, a 27 per cent increase.
A major's average salary had risen from $62,625 to $75,780, a 21 per cent increase.
10 years to fix armed forces staff
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