Prime Minister John Key says New Zealand has more government agencies than a country its size needs and has signalled there could be several mergers to reduce their number.

The state sector consists of 41 departments and ministries, 84 statutory Crown entities, 11 Crown entity companies, 17 state-owned enterprises, 31 tertiary education institutions and numerous "schedule four entities" like the Lottery Grants Board.

The Dominion Post said today the mergers were understood to include rolling the National Library and Archives New Zealand into the Internal Affairs Department, merging the Food Safety Authority with MAF, and amalgamating the Foundation for Science, Research and Technology with the ministry of the same name.

Mr Key told journalists today that ministers could make some decisions next week about a wide range of agencies across the state sector. He was convinced there were too many.

"New Zealand looks out of place with other similar countries in terms of the fragmentation of state agencies and the number of agencies," he said.

He had no information on possible job losses or savings, but "when you have large fragmentation you also have duplication of administrative and back-office support functions."

Mr Key would not rule out the reports about which agencies were being examined and singled out science agencies, saying there was duplication between the Ministry of Research and Technology and the Foundation of Research and Technology.

The ministry was set up in the 1990s to give the Government policy advice and the foundation to fund science research.

Mr Key indicated that this policy/funder split would end in science, but possibly not across the entire state sector.

"This is not an ideological exercise, this is really about saying how do we deliver the best service for the New Zealand taxpayer - how do we make sure it is affordable and how do we deliver efficiency."

The paper said consideration was also being given to amalgamating Women's Affairs into either the Social Development Ministry or the Labour Department.

Past National party leaders have called for the abolition of the Women's Affairs Ministry, but Mr Key said today it was a relatively small ministry and he wanted the Government to focus on where the most gains could be made.

Labour Party state services spokesman Grant Robertson said mergers would be a breach of National's pre-election promise that it would not radically reorganise the structure of the public sector.

Mr Key disagreed.

"What I said in the campaign was there wouldn't be radical reform and I would not describe anything I have seen as radical. Governments over their life time will always look at bringing some entities together and breaking some apart..."

The Government was trying to get a more efficient state sector at a lower cost and this would require some mergers and an investment of about $2 billion over the next two years in new technology.

Mr Key said Cabinet had not discussed the issue today, but its business committee would do so this evening and it was possible that final decisions would be taken next Monday.

The work had been based on reviews by ministers of their portfolios and there could be more mergers further down the track than those announced next week.

Shared services instead of complete mergers in some cases might also be considered.