John Key-era law tying MPs' salaries to average wage to be repealed

A John Key-era law tying MPs' salaries to the average wage is going to be repealed to restore independence to the Remuneration Authority. 

It follows Prime Minister Jacinda Ardern freezing MPs' salaries in August last year, after the Remuneration Authority planned to give MPs a 3 percent pay increase. 

Ardern said at the time MPs' salaries would be frozen while "a fairer formula for future pay increase" was developed for those in politics.

She said it was "the right thing to do" with strike action at the time from nurses, teachers and other workers.

Workplace Relations and Safety Minister Iain Lees-Galloway announced on Tuesday the Government has now completed a review of the way MPs' pay increases are calculated. 

He pointed to the law passed under former Prime Minister John Key in 2015 which tied MPs' pay to average wage increases, just as NZ Super is. 

"In 2015, MPs took control of the way that their pay increases were calculated by replacing the Remuneration Authority's independence with their own preferred formula," Lees-Galloway said. 

"The changes were a failure, with this formula generating higher pay increases than the system used prior to 2015."

The minister said the Government plans to repeal the formula and restore the independence of the Remuneration Authority to calculate increases "in a fair and transparent manner". 

"This means MPs' pay will be calculated using the same process for reviewing the remuneration of other key public office holders."

The formula is considered unfair, because MPs' pay is tied to the percentage increase of the average wage, so if it goes up 2 percent that means someone on a $60k salary gets a 2 percent rise, while an MP on $200k would get the same. 

A Bill repealing the 2015 amendments to the Remuneration Authority Act and the Members of Parliament (Remuneration and Services) Act will be introduced on Wednesday. 

It will propose that the Remuneration Authority makes its determination on 2019 MPs' pay under the amended system.

Future reviews of MPs' pay will occur once every three years, following an election, and will set MPs' pay on a year-by-year basis over the parliamentary term.

The authority will consider:

  • The requirements of the job
  • The need to recruit and retain competition people
  • The need to give fair salaries compared with those received elsewhere
  • The current economic conditions

Green Party co-leader James Shaw said he was disappointed with the outcome of the review because he said it is likely to still increase MPs' pay beyond the wages of other working New Zealanders. 

"It's disappointing when we could be bringing MP pay in line with annual wage changes experienced by New Zealanders generally," he said. 

Ardern earns a base salary of about $471,000. She's the fifth-highest paid leader in the OECD, behind Australia's Scott Morrison who earns about NZ$570,800. 

  • Deputy Prime Minister earns about $334,000
  • Cabinet ministers earn about $296,000
  • Ministers outside Cabinet earn about $249,000
  • Opposition leader earns about $296,000
  • Party leaders earn a base salary of about $179,000
  • Select committee chairpeople earn about $179,000
  • Backbenchers earn about $163,000