The Government is spending $61 million to lift bus driver wages to address nationwide worker shortages that have seen massive service disruptions across the country.

Transport Minister Michael Wood said the money - allocated in this year's Budget - would be spent over four years to lift base wage rates towards $30 an hour for urban services and $28 an hour for regional services.

Wood said there were about 800 drivers needed across the country, including 500 in Auckland and some 120 in Wellington.

He said bus companies had been forced into a "race to the bottom" situation in competing for the lowest-cost contracts to get business.

This was one of the reasons behind Fair Pay Agreements legislation, which allows the negotiation of minimum standards of employment and wages to apply across an entire sector of workers, he said.

"Improving the conditions of drivers will make it easier to recruit and retain the workforce, allowing frequent and reliable bus services," Wood said.

"The minimum terms and conditions were developed through discussions between operators, public transport authorities and unions on how best to improve conditions in the industry and stabilise the workforce."

Transport Minister Michael Wood. Photo / Mark Mitchell

Waka Kotahi NZ Transport Agency would work with public transport authorities and operators to implement the policy in each region if they contribute to the wage increases, and continue to index wage rates.

The funding could also be used to support split shift allowances of $30 an hour or penal rates of 1.2 times for work after 9pm.

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"This will help the industry transition to standard terms and conditions for bus drivers, which currently vary widely throughout the country," Wood said.

New driver terms and conditions will be supported by the Sustainable Public Transport Framework, announced in August, Wood said.

"We recognise the vital role that public transport has in our everyday lives and our economic and environmental future.

"We are committed to supporting public transport and I am excited to see the great sector collaboration that has been instrumental in delivering improved terms and conditions across the country.

"We will continue to work with the sector on meaningful solutions to support public transport."

In Wellington the current shortage of about 120 drivers is expected to increase three-fold in the next decade.

Greater Wellington Regional Council chairman Daran Ponter welcomed the funding and said it would make a difference to current shortages.

"We will work closely with operators and unions to work through the details and how we get the benefits of today's announcement and investment in place for place for Wellington as practicably as possible."