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.
"When you look at percentage increases as a formula for salary increases that only continues to extend that gap between MPs and those on higher salaries and the middle and those on the other end."
Ms Ardern said the Government's coalition and confidence and supply partners New Zealand First and the Greens were "totally supportive" of the decision.
She said she'd had brief conversations with National Party leader Simon Bridges and ACT party leader David Seymour, who "reading between the lines I think probably agreed with the move as well".
"One of the things we've been trying to bridge as a Government is we keep seeing these increases at the top end of the scale, without the same increase at the end of the scale, where most New Zealanders sit."
Minister for Workplace Relations and Safety Iain 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.