Teina Pora, who spent more than 20 years in prison after being wrongly convicted, will get his $2.5m compensation increased to match inflation.
The decision was made by Justice Minister Andrew Little on Thursday, his first day in his new job.
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Mr Pora was wrongly jailed, aged 17, for the rape and murder of Susan Burdett. His conviction was quashed in 2015 and the following year, he was awarded $2.52 million in compensation for the wrongful imprisonment.
Justice Rodney Hansen recommended inflation be added to the compensation, but then-Justice Minister Amy Adams decided not to, based on guidelines. Mr Pora's lawyers then went back to court, seeking an allowance for inflation in his compensation package.
In August 2017, he won his case, with Justice Rebecca Ellis saying Justice Minister Amy Adams' interpretation of the guidelines for compensation was incomplete and constituted an error of law.
"[The guidelines] are concerned with putting right, so far as possible, serious wrongs," she said.
"Although Mr Pora has, of all the claimants, spent [by far] the longest time wrongly incarcerated, he has, in real dollar terms, been the most poorly compensated for his years of lost liberty."
However, the National Government reserved the right to appeal - something Mr Little has decided against.
"The High Court was pretty clear that when Cabinet considered it last time, they hadn't considered adjusting by inflation as a matter of fairness," Mr Little told Radio New Zealand on Thursday morning. "The High Court has now said that the government must do that, so we will do that.
"I hope that that will be as quickly as possible."
Former Prime Minister Bill English said, at the time, that while he accepted Mr Pora suffered a "serious injustice", he wouldn't comment on his court action.
"In our view, we applied the guidelines," Mr English told The AM Show. "He's quite free to go off to the court to contest that.
"Teina Pora deserves significant compensation and this is an argument over just what exactly that amount should be."
Mr Little now says he will look at the legal advice the previous government used to make its decisions.
"I'm told that there has been some advice that maybe has some contrary recommendations," he told RNZ.
"Once I'm sworn in as minister, I'll be obliged to look at that, but I'm equally obliged by the High Court ruling to now consider the issue of adjusting for inflation."