Prime Minister Jacinda Ardern, government ministers and public service chief executives will take a 20 percent pay cut for the next six months.
Ardern announced the cut at the Covid-19 government briefing this afternoon.
She said it acknowledged New Zealanders who were on wage subsidies, taking pay cuts, or losing their jobs due to the Covid-19 coronavirus.
"We feel acutely the struggle that many New Zealanders are facing and so too do the people that I work with on a daily basis.
"This was always just going to be an acknowledgement of the hit that ... many New Zealanders are taking right now."
She said she knew the decision to take a paycut would not affect the government books, but leadership had to come from the top.
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"I acknowledge my colleages, both in the executive but also the colleagues we work with in the public service for the decision that was taken today."
National Party leader Simon Bridges had been told of the pay cut decision, and that he indicated he would take part, she said.
She said public service leaders felt acutely about the struggles many New Zealanders were facing.
"It also stands alongside many actions taken by many people - private sector, citizens - to tackle the health and economic challenges of Covid-19."
"Neighbours looking out for one another, rent freezes and landlords who are supporting tenants. Things like the winter energy payment and benefits that are helping those who are on restricted incomes to keep warmer and well.
"New Zealanders who are staying home to save lives. The student army who are delivering groceries to over 65s, and Ministry of Health officials who are in charge of mandatory quarantine which I have received a message about their professionalism and exceptional work.
"So many examples of people showing what others meant to them and doing their bit in our effort to stamp out Covid-19 and show a little bit of kindness along the way."
She said the economic package now totalled more than $23 billion, including the wage subsidy that had paid out over $9bn to 1.5 million New Zealanders.
The government today also announced a $3bn tax break for small businesses.
Ardern said the government was not considering pay cuts for essential workers, nor would New Zealanders consider that appropriate.
ACT Leader David Seymour called for the cut to be extended to all MPs, and had drafted legislation to allow that to happen.
"All members of Parliament should have the opportunity to show leadership and solidarity with workers and businesses.
"The pay cut announced today must apply to all MPs, but it's constitutionally inappropriate for the Prime Minister to cut the pay of those holding the government accountable," he said in a written statement.
"That's why it's vital that Parliament itself passes my legislation, which will cut the salaries of all MPs by 20 percent, as soon as it resumes.
"I have drafted legislation and I'm in the process of consulting with other political parties.
"New Zealanders are making extraordinary sacrifices right now. It is only fair that all MPs show solidarity and make them too."
Ardern said the mechanism being used in the meantime was an in-principle decision about Ministers and Chief executives and the government had yet to work through how that would be enacted through the remuneration authority and its underlying legislation.
"The one thing to keep in mind though is that group covers a wide range of individuals including the likes of the judiciary and there are different rules that can apply about changes that can be made there.
"It's not a matter of making these changes on behalf of everyone and nor is that somethinwe're able to do. We've made a decision about ourselves."
She said she did not want the people feeling the economic hit to be those who were on the front line earning low and middle incomes, rather it needed to be the people at the top.
State Services Commissioner Peter Hughes welcomed the cut, and said it was the right thing to do.
"I am proud of the way the public service workforce has mobilised to respond to one of the biggest challenges New Zealand has ever faced. Many are volunteering to do more than their normal duties and coming up with innovative ideas and solutions to get the job done," he said.
The Commissioner and the Deputy State Services Commissioner, whose salaries are set by the Remuneration Authority, also committed to a 20 percent pay cut.
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