New Zealand Nurses' Organisation (NZNO) told the Otago Daily Times that ward 7C at Dunedin Hospital had been forced to close beds due to issues of understaffing.
The number of beds on the ward has temporarily dropped to 20 from 24 because it did not have enough staff to cope.
NZNO president Anne Daniels said this was a direct result of HNZ's "recruitment freeze" implemented last year.
"NZNO calls on HNZ to utilise safe staffing ratio tools for this work to ensure patient needs are met with sufficient nurse-to-patient numbers.
"This will also require the current pause in the FTE calculations for the critical care demand management programme to be lifted.
"If this is not done at the soonest, it is the patients who will pay the price for hospitals that are continuously understaffed and under-resourced."
Ms Daniels said this case was one of many that disproved HNZ's assertions there was a surplus of nurses.
"Commissioner Dr Lester Levy and chief executive Margie Apa have claimed there are too many nurses, so why is it that wards in our hospitals are forced to close their beds?
"The government's attempts in trying to normalise ongoing understaffing can only be detrimental to the health system."
But HNZ Southern group director of operations Hamish Brown said there was no hiring freeze on frontline clinical roles at Dunedin Hospital.
"Recruitment for clinical roles responsible for the delivery of frontline services at Dunedin Hospital continues in line with budgeted FTEs.
"Bed capacity on ward 7C has been temporarily reduced by four on January 7 due to nursing staff shortages.
"To date the bed reduction has not impacted hospital operations.
"However, our team will continue to actively manage the situation and flexibly deploy staff as necessary."
Mr Brown said there were four new graduate nurses starting on January 27 and two experienced nurses returning in late January filling the vacancies.
"Once the new graduate nurses have completed their orientation period, the ward will return to our full capacity of 24 beds. We expect this to be in late January."
Ms Daniels said HNZ's response "contradicted itself".
"They cannot continue to tell the public that they have over-recruited nurses and then say that they've had to reduce beds by four because of nurse staffing shortages.
"Both statements don't stack up."
Ms Daniels said while it was encouraging that HNZ was employing recent graduates, it took a graduate nurse 18 months to two years to get the experience and skills "to become absolutely proficient in any particular specialty area".
"So they will still be under capacity despite the recruiting. So this is also problematic.
"HNZ's response suggests that just because they have got the people to do the work, then the work will be able to be done at the standard that is required."
It comes after reports the hospital has been leaking when it rained, had poor ventilation and generally being regarded by clinicians as not being fit for purpose.
The government has been exploring two options for the new Dunedin hospital project: either a scaled-down version of the original proposal at the Cadbury's site, or a retrofit of the existing Dunedin hospital.
Figures provided to the Otago Daily Times have also showed although the $32million urgent interim works package targeting key areas such as ICU and endoscopy was almost complete, there was a further $23m that was set aside for other works on the hospital.
In total, only $4m of this has been spent.