Alliance Party co leader Kay Murray says it is good news that MP's have decided to shave $1.5 million off their taxpayer funded housing allowance.

But MP's will still be entitled to $37,500 a year on top of their $130,000 plus salaries and other allowances, to spend on their accommodation - regardless of whether they already own a home in Wellington.

The sum of $37,500 a year or approximately $720 a week apparently reflects the market rentals in Wellington.

Ms Murray says MP's should spare a thought for beneficiaries and those on the minimum wage or just above who live in Wellington.

"A forty hour week at $12.50 per hour, the minimum wage, will earn a worker a gross income of only $26,000 a year, which is $11,500 less than MP's calculate they need simply for accommodation costs."

The Alliance says that people on the minimum wage face severe problems in simply putting a roof over their heads and food on the table.

Ms Murray says MP's should immediately vote to increase the minimum wage to $15 an hour.

This is the rate called for by Unite Union in its petition for a referendum now circulating.

A minimum rate of $15 an hour would increase a worker on the minimum wage's gross income to $31,200, says Ms Murray.

This is still short of MP's accommodation allowance, but significantly closer to a living wage by the less extravagant standards of most New Zealanders.

"To achieve a minimum wage the equivalent of MP's accommodation allowance would require that the hourly rate be increased to just over $18 an hour."