Police officers have overwhelmingly rejected the latest pay offer, saying it falls short of addressing their concerns and needs.
The Police Association said more than 75 percent of its members voted against the offer, which Police Minister Mark Mitchell said included the overtime rate the union asked for, a $1500 cash payment for members, a pay increase in the third year.
In a statement, Mitchell said this was an incredibly disappointing outcome.
"The offer was significantly better than what was presented in August last year, with an additional quarter of a billion dollars of government funding.
"The government has been very open about the financial challenges we've inherited, and despite the challenging environment, this was a markedly better offer."
He said the pay increase in the offer was "well beyond the forecast rate of inflation - something which may not have been guaranteed under the offer made last August".
Last month, police described the previous pay offer as "insulting", "disgusting" and "demoralising" as members were presented with the same offer which they had rejected in September 2023.
Police Association president Chris Cahill said members were looking for a sincere effort by the government to address the cost of living crisis and recognise the increasing dangers officers faced.
"This offer fails to provide any real attempt to remedy the steady decline in officers' salaries, particularly when measured against comparable professions' salaries, such as teachers and nurses," Cahill said.
"If police and the government genuinely value the role and commitment of officers, they need to lift their game in the remuneration stakes. They have one more chance to do that."
The Police Association will now ask the mediator to immediately direct negotiations to final offer arbitration.
"We have a clear expectation that government will now fund police to improve what it puts on the table at final offer arbitration," Cahill said.
Mitchell said the arbitration process would add more time to what had already been a lengthy process.
"It's a matter for police and the association to work through those steps, and I'm not in a position to comment further while that process is underway."
Earlier this month, Mitchell admitted this government could not compete with the salaries Australia was offering New Zealand officers in a recruitment campaign it had launched.
Prime Minister Christopher Luxon has previously backed Mitchell on the negotiations, saying he was "very focused".
"I think what you're hearing from police, and what I hear from police is, they appreciate the fact that they know they've now got a government from the top that is actually going to make sure that we uphold rights and responsibilities in this country."