MPs’ pay rise palatable with simple moves

It was once — perhaps still is — commonly accepted one shouldn’t talk about money in polite company. The country’s MPs certainly appeared reluctant to discuss the topic when pay rises for politicians were in the spotlight last week.

After a freeze on pay rises since 2017, the Remuneration Authority — an independent body — moved to lift MPs’ salaries last Monday.

For most MPs, the decision sees their pay jump by a total of 10.5 per cent over the next three years.

Prime Minister Christopher Luxon’s salary will rise in tranches by $49,000 from his previous $471,000 to $520,000 (10.5 per cent) in mid-2026, while Opposition leader Chris Hipkins gets a more modest $13,000 increase over the same period.

Cabinet ministers’ pay will jump by almost $30,000 over the three-year period from $296,000 to $327,100 in 2026, while ministers outside Cabinet go from $249,839 to $276,000.

Backbench salaries will go up by about $20,000 from $163,961 to $181,200 in July 2026.

Deputy Prime Minister Winston Peters’ salary goes up by about $10,000 immediately from $334,100 to $344,100 — and that salary rises to $369,800 by 2026, by which point Act leader David Seymour will have the job.

The annualised percentage pay increase for MPs and ministers — particularly compared to general wage inflation since 2017 — is relatively modest.

What is likely harder for some voters to stomach is the dollar value of the hikes.

Stats NZ puts average weekly earnings rises by fulltime workers in the December 2023 quarter at $1588 (about $82,500 a year). A 10 per cent increase for the average worker is less than half (in dollar terms) of the amount going into the pocket of a backbench MP.

There has long been a debate on the right level for politicians’ pay. MPs are, of course, public servants. Going into politics should never be a pathway to wealth (despite the lucrative lobbyist jobs on offer to many quitting Parliament).

On the other hand, it is naive to think being an MP is entirely disconnected from the marketplace. If MPs’ pay rates become too out of whack with the private sector, some of the people with the skills to tackle this country’s challenges simply won’t go into politics. New Zealand is worse off if that happens.

But politics, like comedy, can be all about timing. Inflation — which determines how far workers’ pay stretches — is falling, but is still higher than the Reserve Bank’s target range. Interest rates are tipped to stay higher than earlier forecasts, meaning housing costs are likely to do the same.

The unemployment rate is rising and tipped to head higher still.

Luxon read the room when he immediately indicated he would donate his pay increases to charity.

Other MPs would be wise to follow suit if they wish to maintain favour with voters. Better yet, they could opt to defer taking any increase until the economy starts improving.