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The Education Review Office (ERO) review has found many teachers are walking into their first jobs feeling unprepared for managing pupil behaviour, helping pupils with learning needs or using tests and data to assess pupil achievement.
"Despite a substantial government investment of more than $80 million in initial teacher education in 2016, ERO has found a lack of confidence in the selection, professional education and capabilities of many newly graduated teachers,'' the report says.
"These concerns, while not universal, are widespread, and are compounded by systemic issues such as variation in initial teacher education programmes and components of theory and practice.''
The report comes two days after a global study found the average reading level of New Zealand 10-year-olds has dropped to its lowest level on record.
"In the period from 2000 to 2015, we have witnessed a decline in New Zealand's performance as a nation in the critical areas of reading, mathematics and science,'' the ERO report says.
"The status accorded to the teaching workforce is a critical element in those education systems identified as high performing, such as Finland, South Korea, Singapore and Hong Kong.
"These countries assure the quality of entrants to teacher education, place a strong emphasis on accreditation of initial teacher education programmes, and place significant emphasis on the transformation into the profession through mentored induction and assessment of readiness to teach.''
In New Zealand, teacher training was confined for many years to colleges in the six university centres, but was deregulated in the 1990s and teachers can now train at 25 institutions.
ERO chief review officer Nicholas Pole said the large number of institutions made teacher training "quite disaggregated'', but ERO found no agreement on which educational institutions were not performing.
"We asked principals which providers are better, but we didn't get any consistency,'' he said.
ERO surveyed 279 recent graduates in early childhood education and 561 recent graduates in schools via an online survey and in-depth interviews.
The online survey was generally positive.
More than 80% of newly trained school teachers were confident they knew what they needed about both subject content and teaching methods.
But when interviewed, many said what they had learnt did not link to what they experienced in practical placements in schools.
The reviewers also interviewed principals and head teachers at 118 schools and 109 preschool services.
Both these leaders and the new teachers "highlighted classroom and behaviour management as an area that needed more support''.
"They said reality was a shock for some newly graduated teachers, and they could be better prepared for diverse contexts,'' the report says.
The Education Council, which has recently taken responsibility for teacher training, plans to raise literacy and numeracy requirements for entering teacher training by 2020, encourage more postgraduate teacher training, and require fewer but longer practical in-school placements "long enough for genuine relationships to develop''.
Education Minister Chris Hipkins said training needed "much more of a practical component'', and training institutions should be required to recruit trainees to meet shortages in subjects such as maths, science and te reo Maori.
"The current funding model based on bums on seats is not working for students or giving us the best value for money,'' he said.
Mr Hipkins plans "some things in there for teacher training'' in a pre-Christmas package aimed at tackling teacher shortages, especially in Auckland.