Finance Minister Grant Robertson says he deeply regrets the distress caused by public sector pay restrictions.
However he maintains the restrictions do not amount to a pay freeze, or austerity.
"I don't see it that way and the reason is this ... ultimately what ... was released was the public sector pay guidance and that's what guides public sector chief executives when they are going to go into negotiations but that's the starting point, this is in most instances a collective bargaining process from which there will be the final outcomes."
The restrictions will prevent pay rises for public servants who earn more than $100,000 a year, until 2024, and limit those available to people who earn more than $60,000 a year.
Robertson said the government does want to lift the pay for those earning $60,000 or less, to adjust the pay of people earning between $60,000 and $100,000 but admits the guidance does say to hold on pay increases for those earning more than $100,000.
"Our desire [is] to get a focus on reducing inequality and lifting the lowest pay and while I appreciate that across the board public servants have worked very very hard, we still have 25 percent of our public service who earn less than $60,000 and while everyone says 'good let's lift their pay' that hasn't happened to the extent that we would have wanted it - that's why our focus is there."
The government has to be careful in managing the economy after taking on a huge amount of debt due to the coronavirus pandemic, he said.
Robertson said that meant people's pay might not rise as much as they would like it to.
However he said there is still scope for pay progression, pay equity and bargaining.
"I understand this has caused distress and upset, I obviously regret that deeply, but we are not talking about a pay freeze here, we are talking about a process or guidelines for negotiation."
Robertson said it is important to remember that despite New Zealand's economy weathering the pandemic better than expected, the country has still had to take on a huge amount of debt.
"We're still taking on an excess of an extra $100 billion worth of debt that will continue to grow in fact over the next few years before we can start to bring it down from the middle of the decade."
Robertson said he believes people were distressed because they incorrectly believed the government was introducing a pay freeze.
"In the case of teachers they will continue to move through their pay scale, in the case of nurses, not only that but we're in bargaining with them at the moment which includes a pay equity deal which would be you know a significant boost in funding once that's agreed to."
Robertson said during talks with the unions some members were angry about what had happened with restrictions, but ministers were also able to start talking to them about how to lift low wages, to reassure unions that there was still the possibility for cost of living increases within the restrictions and that the guidance would be reviewed after a year.