New Zealand Prime Minister Jacinda Ardern has announced a 12-month pay freeze for the country's politicians, saying they are already paid well enough.

Key points: NZ's independent Remuneration Authority had recommended a 3 per cent pay rise for MPs

NZ's independent Remuneration Authority had recommended a 3 per cent pay rise for MPs Pay increases had been linked to average wage increases across the country

Pay increases had been linked to average wage increases across the country Over the next 12 months, a new formula will be developed for working out pay increases

MPs were due to receive a 3 per cent pay rise during September, backdated to July 1, in line with recommendations from the independent Remuneration Authority, but Ms Ardern said she would be introducing legislation to block this going through.

It would have seen Ms Ardern pocket an extra $NZ14,131.47 ($AU12,810) per year on top of her current salary of $427,072.

The pay increase would also have seen Ms Ardern's cabinet colleagues earn $8,046 more, as well as a $4,456 bump for the average backbencher.

"We do not believe, given that we are on the upper end of the salary scale, that we should be receiving that kind of salary increase," she said.

"Because we, of course, already are on a high income … one of the things we've been trying to bridge as a government is the fact that we see these increases at the top end of the scale, without the same increase at the end of the scale where most New Zealanders sit."

Ms Ardern said the formula currently used by the Remuneration Authority — which the independent body had no control over — was "not acceptable".

"Now, this move doesn't save a lot of money in the scheme of things, but it does send, we believe, a strong signal about what our government values, what we stand for, and our determination of course to make sure that the economy is working for everyone," she said.

New Zealand's cabinet has denied themselves an $8,000 pay rise. ( Reuters: Charlotte Greenfield )

Ms Ardern the OECD's fifth highest paid leader

Data released by international consultancy group IG in May showed Ms Ardern was the fifth highest paid leader in a comparison of 32 members of the Organisation for Economic Cooperation and Development (OECD).

In a study of the pay gap between world leaders and average citizens, Ms Ardern was ranked third, earning 8.63 times the average New Zealand wage — which was ranked 18th out of 32 in the study.

Australian Prime Minister Malcolm Turnbull tops the earning list by world leaders, earning $538,000 which is 10.14 times the average Australian worker.

According to New Zealand media, Ms Ardern is not the first prime minister to introduce legislation to reduce politicians pay.

In 2015, former prime minister Sir John Key passed a law to cut a pay rise from 3.5 per cent to 1.5 per cent after linking pay rises to average wage increases, according to Fairfax Media.

Ms Ardern said she had contacted NZ's opposition leader Simon Bridges about the freeze, and he had been "supportive".

The NZ leader said they would introduce a different way to determine pay rises for the country's politicians.

"We'll then use that 12-month period to develop a fairer formula for the Remuneration Authority to use when determining future pay rises," she said.

Australia's federal politicians were given 2 per cent pay rises in July, with backbenchers earning about $207,000 a year, compared to $148,712 across the ditch.

ABC/ AP