Prime Minister Tony Abbott is reportedly set to freeze his own salary as well as those of other federal politicians and senior public servants.
Media agencies are reporting that the move is understood to have the backing of the independent Remuneration Tribunal.
It comes as Treasurer Joe Hockey prepares to deliver his first budget on Tuesday night, warning that everyone, including politicians, will have to share the pain.
The pay freeze could cost Mr Abbott, who earns an annual salary of $500,000, an estimated $10,000 a year and up to $16,000 a year with the impact of his proposed deficit tax factored in.
The average backbencher will miss out on an estimated $3900, based on having to forgo a 2.4 per cent pay increase.