At least $200 million worth of school buildings need to be demolished because they are not fit for purpose, says Education Minister Chris Hipkins.
The revelation comes after Prime Minister Jacinda Ardern warned on Monday there are problems caused by "a lack of investment" in "almost every portfolio".
Mr Hipkins said the education sector is facing a challenge maintaining existing facilities and building enough new schools and classrooms to cope with population growth.
In schools with extra capacity, Mr Hipkins said some buildings may simply be demolished and not replaced.
The Government has been lowering expectations ahead of the release of its Budget.
Opposition leader Simon Bridges said on Tuesday the Government is searching for excuses.
"What you're going to have is officialdom out there in our schools and hospitals looking for doors that don't shut properly," he said.