Mr Hamilton said it had been understood resources would be diverted from posts in Europe to achieve the Government's Asean goals.
"I am surprised therefore that what is now contemplated for Singapore is equivalent to a major reduction in our foreign policy effort, and I wonder if this has been given the careful consideration it undoubtedly merits."
The leak comes after the role played by overseas consular staff was highlighted by the actions of New Zealand's consul in Cairo, Barbara Welton, who has been heralded for her actions in a tense child custody dispute in Algeria last month.
A confidential document shows her job is among those proposed to be cut in the shake-up.
Labour foreign affairs spokesman Phil Goff said the Government wanted to target Asean but was cutting the resources to do so.
"There is no integrity in that decision. It's a bit like Cairo - you can't halve the embassy and then say it will have no impact on our ability to press our case on trade, on security matters, on foreign policy issues, or to provide consular assistance," he told APNZ.
"These embassies are going to be gutted and they won't be able to the job that we require of them, and the ministers won't front up and acknowledge that fact."
Mr Goff said the Government had chosen to hide the $40m savings figure when it released Mfat's briefing paper to Foreign Minister Murray McCully earlier this year.
"It's a huge cut, and it's going to quite critically affect our ability, through our embassies and high commissions, to do the job that we need to do."
Speaking on behalf of Mr McCully, who is an official visit to Myanmar, Attorney-General Chris Finlayson today denied the Government was planning savings of that amount.
Asked in Parliament about Mr Hamilton's comments in the leaked cable, Mr Finlayson said he had not seen it and could not comment.
Prime Minister John Key today said no decisions had been made on job cuts at Mfat and the matter was still out for consultation.
Meanwhile, the decision to pay $26,000 for a small charter plane for Mr McCully's three-day visit to the reclusive state of Myanmar has been criticised in light of the proposed cuts.
Labour leader David Shearer said daily commercial flights to Myanmar were safe and Mr McCully could have taken one.
"I think Murray McCully's being a bit extravagant given the fact that he's just cut one quarter of Mfat's staff, including people in Cairo who are helping out New Zealand citizens in really, really difficult circumstances," he said.
But Mr Key today defended the decision to charter the plane, which was made by New Zealand's ambassador in Thailand, Bede Corry, rather than staff in New Zealand.
"New Zealand's a small country with a strong voice in human rights and democracy, and the options are either use a small charter plane or don't go. I'm of the view we should be going," he said.
Mr McCully will meet Myanmar's Foreign Minister U Wanna Maung Lwin and other high-level officials in the capital Naypyidaw.
He will also meet pro-democracy opposition leader Aung San Suu Kyi in the country's former capital of Yangon tomorrow.
His trip comes ahead of Myanmar's upcoming national elections, which Ms Suu Kyi is contesting after spending some 15 years under house arrest until her most recent release in November 2010.
