Key Points:

The Government has axed two investigations aimed at improving the pay of women as it tries to save money by controlling public sector salaries.

The inquiries were aimed at female social workers at Child, Youth and Family, who are paid 9.5 per cent less than their male colleagues, and at inequities in the pay of mainly female school support workers.

But State Services Minister Tony Ryall said the investigations would "generate an additional form of remuneration pressure that is unaffordable in the current economic and fiscal environment".

Mr Ryall also issued new pay expectations for the state sector yesterday, ordering department heads to save money by holding salary rates.

All new contracts with the sector's estimated 45,000 staff will have to be done in "fairness to the taxpayer".

Brenda Pilott, national secretary of the Public Service Association, said the moves were a "slap in the face for social workers" as well as "a really bad message to women workers".

"The Government is saying that issues of inequity that are well documented are not important enough to be fixed," she said.

An earlier review found that the 9.5 per cent gap in the CYF pay rates was primarily due to the fact that 80 per cent of its social workers were women.

Labour women's affairs spokeswoman, Sue Moroney, said axing the pay investigations sent the message that women were "second-class citizens at work".

She said the gender pay gap stood at 12 per cent in New Zealand, and strong advocacy was required to close it.

Mr Ryall said when issuing the new pay instructions that there was a worsening financial outlook and the state sector had to "play its part".

His instructions say state sector increases "must not lead private sector movements" and must "avoid flow-on implications across the state sector".

State agencies will have to address recruitment and retention issues "without fuelling wage inflation".

The instructions say any rises must be "fiscally sustainable within baselines, responsible, and demonstrate value for money".

Mr Ryall said chief executives would be held to account for meeting the expectations in their performance reviews with the State Services Commissioner.

Labour's state services spokesman, Grant Robertson, said the new instructions meant "National is freezing public sector salaries and, in some cases - where departments are looking at big budget cuts - pay cuts".

"Chief executives are being given the message: reduce salaries or cut jobs."

He said wages of ordinary workers needed to keep up with increases in the cost of living.