A decision not to factor inflation into Teina Pora's compensation payment for wrongful imprisonment has "grotesquely created for him a new and further injustice", his lawyer says.

Pora spent 21 years in jail in one of New Zealand's worst miscarriages of justice after he was wrongfully convicted of the 1992 rape and murder of Susan Burdett.

His convictions were quashed by the Privy Council in 2015.

The 41-year-old was paid $2.52 million compensation in June last year, but has sought a judicial review of the Government's decision not to add inflation to compensation paid to him.

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His lawyers argue Pora should be given $500,000 more. The current payment equates to about $11.14 for each hour spent in prison, which he compared to the current minimum wage of more than $15.

Lawyer Gerard McCoy QC told Justice Rebecca Ellis in the High Court at Wellington this morning that the Cabinet's decision not to allow for inflation in the payment was "not just ungenerous and niggardly, but in public law terms is both unlawful and unreasonable".

"His case is the worst case of injustice in New Zealand's legal history, measured by the parameter of time wrongly spent in custody."

Justice Minister Amy Adams has said the decision not to adjust Pora's compensation for inflation was "lawful and consistent with the Cabinet guidelines for wrongful conviction and imprisonment".

Justice Rodney Hansen gave an independent recommendation that Pora's compensation be adjusted for inflation, but the minister chose not to follow the recommendation, despite Hansen saying it would be "anomalous and unjust" if the adjustment was not made, McCoy said.

There have only been eight successful cases of compensation being awarded under the guidelines from the year 2000.

Pora's case is the least compensated of all such cases when analysed on an annualised basis, McCoy said.

"To be fair to the learned Minister of Justice, she was given a number of reasons why she should recommend to Cabinet that inflation not be provided," McCoy said.

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Adams gave a number of reasons not to add inflation.

One was that the guidelines did not provide for inflation adjustment.

McCoy's submission was that contention was "wrong as a matter of law".

"But by way of gentle riposte, I add the guidelines do not prohibit inflation adjustment."

Another reason was that adding inflation could be seen as "unfair" to the other seven cases that had received compensation.

McCoy said none of those people had raised the issue of inflation, and "it wouldn't be unfair to them for Cabinet to be fair to Teina Pora".

"Ultimately the logic of the learned minister's approach is that you could never actually change anything because it will always . . . become unfair to some whose matter had been dealt with earlier."

Another reason was that a review of the compensation process was under way, but this had been going on for years.

McCoy said the "extraordinarily slow recommendation process" was not a bar to correct entitlement.

Defence lawyer Jonathan Krebs said Cabinet was using the guidelines "not to create justice but to create injustice".

He said it was "wrong for the court to stand by and allow these guidelines to be used in that way".

Crown lawyer Paul Rishworth said departing from the guidelines that a wrongly imprisoned person be paid $100,000 for each year they were in custody meant Cabinet would need to start looking at numerous different factors when working out compensation.

"There would be many ways of doing this," he said.

Justice Ellis said Pora's payment was "less generous" than what Arthur Allan Thomas was paid, though he was paid under a different scheme.

"The guidelines are carefully drafted and they're concerned [to enable Cabinet to do justice] in individual cases . . . here we seem to have a situation where they don't quite get there, so the question is what can be done?" she said.

In May the Commissioner of Police announced an application would be made to the court to try Malcolm Rewa a third time for Burdett's murder.

Rewa was convicted of raping Burdett. Two juries could not agree on a verdict for murder.

Key dates

1994: Pora convicted of the rape and murder of Susan Burdett.

2000: Convicted again, after earlier conviction quashed.

2014: Pora was released from prison at his 13th appearance before the Parole Board.

2015: The Privy Council quashed Pora's convictions.

2016 March: A retired High Court judge, hired by the Government to review the case, finds Pora innocent on the balance of probabilities.

June: Government awards $2.5 million compensation.

2017: Pora challenges decision not to adjust his compensation for inflation.