The Government has announced it will freeze the allowances and salaries of all MPs for a year, despite them being due for a pay rise.
The Remuneration Authority had indicated that based on its formula, which it is legally obliged to follow, it would be issuing a pay rise for MPs in the order of 3 percent.
Prime Minister Jacinda Ardern said it's "just not appropriate for MPs to be the subject of such an increase".
Ms Ardern has informed the other party leaders in Parliament of the Government's decision to introduce legislation to freeze MPs' pay for a year and develop a "fairer formula" for future pay increases.
"The current formula isn't meeting our expectations," she said.
Minister for Workplace Relations and Safety Iain Lees-Galloway told RadioLIVE Drive his Government wants to "decrease the gap between those at the top and those who are earning middle and lower wages".
"And the formula that we've got at the moment just continually increases the gap, and we just didn't feel that it was right to carry on with that," he said.
Mr Lees-Galloway said legislation would be introduced to implement the freeze as soon as possible, then a review would begin to find a new system to determine MPs' remuneration.
The freeze will apply to MPs' salaries, superannuation subsidies and expense allowances.
It won't affect expenses for accommodation, travel and international travel.
Listen to the full interview with Iain Lees-Galloway above.