A member of the Niue assembly says it was very sad day for the country when MPs voted to cut workers' wages by ten percent.
The government has been battling to overcome a financial crisis caused by overspending and poor revenue collection while its debt has soared.
The assembly agreed to cut the salaries of all government employees, including MPs, and cut some government programmes to try to balance the budget.
MP Hima Douglas says it was an historically sad day because the island has never been forced into such a position before.
But he says without the cuts the government may not have been able to meet the next pay round and he predicts the island's economic situation will get worse.
"The measures that the government has put in place up until now will go some way to addressing the problem but it not going to fix it altogether. Ten percent cuts might continue well into the next financial year, as well as other measures."
The Niue government is to face a vote of no confidence next week over the country's financial state.
