Health New Zealand Te Whatu Ora is freezing the hiring of graduate nurses into the hospital system, the nurses' union NZNO says.
It said Health NZ was pausing the mid-year intakes of nurse entry to practice and specialist practice.
The programmes provided graduates with support and professional development to facilitate their transition during their first year of practice.
NZNO chief executive Paul Goulter told Morning Report it was worrying that the health agency had changed its tune after previously committing to the permanent employment of new graduates.
But Health NZ denied the pause in the recruitment of graduate nurses.
"What they're saying is they will recruit all of the graduate nurses and what they're not saying is there is a budget in place and that they cannot go past that budget," Goulter said.
He said the budget cap was worrying the sector.
The agreement was that the public health system and hospitals "would employ New Zealand-trained graduate nurses as they came out of their degree programmes".
Alternatively, they would be placed in primary health or age residential care.
"There is an absolute shortage of nurses and it's acute in various areas."
The statistics were "terrible" in mental health, emergency, oncology, and women's health, Goulter said.
It did not make sense to lower the number of NZ-trained graduate nurses being hired.
"We need more of them. We're using internationally qualified nurses, immigrant nurses at the moment, but that does not and cannot substitute for the need to train our own and give them good jobs.
"What been we've been told is that no longer can they guarantee every graduate nurse a job."
Goulter said no guarantee of a job from Te Whatu Ora would "disincentivise nurses to go into training or for those nurses that are coming out of training to stay inside the system".
In a statement, Health NZ chief nurse Nadine Gray said there was no pause in the recruitment of graduate nurses.
"Any statements saying otherwise are incorrect.
"The graduate process is still underway; applicants have expressed their preferences and matching is happening across the sector."
Health NZ was continuing to employ graduate nurses where vacancies were available, Gray said.
The health sector in New Zealand was bigger than just Health NZ, she said, and graduates could also be employed in primary and community care, aged residential care or public health.
However, Goulter said those who found jobs in other areas would be disadvantaged by the wage disparity than what they would earn with Health NZ.
Health NZ declined to be interviewed by Morning Report.
Third-year nursing student Sarah was shocked about the potential recruitment freeze.
"We've been told our entire degree that we're in such demand and that New Zealand's crying out for nurses. Here we are fully New Zealand-trained, and potentially facing hiring freezes.
"My fiancé is a high school science teacher and as soon as I told him the news ... his first reaction was, 'Well, I guess we'll go to Australia'."
Sarah said students needed certainty.
"Someone needs to set the record straight officially, or you're going to have a lot of new grad nurses that are not going to sit registration in a month and will go somewhere else."