Independent Renumeration Authority recommends a 2.8% pay rise for Members of Parliament

An independent body tasked with setting the salaries of Members of Parliament (MPs) has recommended giving politicians a 2.8% pay rise this year and 10.5% by 2026. 

This would lift a backbench MP’s base salary to $168,600 this year and $181,200 by 2026, up from $163,961 today. 

Christopher Luxon, as Prime Minister, would see his salary increase to $484,200 this year and continue to climb to $520,200 in 2026, up from his current salary of $471,049.

In a statement, a spokesperson said the Prime Minister has indicated he does not “want or need” a pay raise and would donate any increase to charity.

Senior ministers and the leader of the opposition would get a pay boost from about $300,000 today to between $309,000 and $327,100 by the next election. 

Finance Minister Nicola Willis also said she did not want a pay increase, while opposition leader Chris Hipkins said pay reviews were independent for a reason and should be accepted. 

This is the first full review of MP’s pay in two decades. It compared current salaries to those in other Westminster style democracies as well as in New Zealand’s private and public sectors. 

The report said this showed NZ politician’s salaries were less than almost all others in the comparison. However, the Remuneration Authority said it applied a “felt fair test”.

It said the test considers “all the relevant aspects of the item and, taking all things into account, answering the question, ‘is this fair in the entirety of the matter being considered’”.

After the initial 2.8% pay bump, salaries would be lifted each year based on forecasts of increases in the Labour Cost Index. The forecast growth would be equivalent to a 10.5% lift over three years. 

Pay freeze

Politicians' pay was last increased in 2017, before the Labour Government restored the Remuneration Authority’s power to set wages.

But before it was able to make any changes to salaries, the Covid-19 pandemic arrived and the Labour Government opted to freeze pay. 

Since then, the Labour Cost Index has climbed 17% while hourly earnings rose more than 30% and the Consumer Price Index jumped 20% — effectively eroding purchasing power.

The Taxpayers’ Union came out in opposition to the recommended pay increases, saying they were out of step with the financial challenges facing households. 

“While the average income of households is going backwards, MPs are locking in annual increases that don’t reflect the real world,” a spokesperson said in a statement. 

“The decision demonstrates that the Wellington-based Remuneration Authority is out of touch with the rest of New Zealand”. 

While it is true that average real incomes have been declining, nominal incomes have been rising faster than normal to keep up with high levels of inflation.