The Justice Minister has confirmed the Crown is considering appealing against the High Court decision that found Teina Pora's compensation should be increased in line with inflation.
The Justice Minister in the caretaker government, Amy Adams, said Cabinet had not made a final decision but had filed a so-called placeholder notice of appeal.
Ms Adams' move effectively preserves the government's position, putting the case on ice until a new government is formed.
Ms Adams said if the incoming government didn't want to appeal, the notice could be easily withdrawn. However because the time to file the appeal expires tomorrow, the decision had to be taken today.
Mr Pora's supporter, former police officer and private investigator Tim McKinnel, said on Twitter that Mr Pora is sad and disappointed by the decision.
A former police officer and now private investigator, Mr McKinnel said the decision reeks of political cynicism.
"He's disappointed, he's sad, he wants to have this over. He doesn't want to keep fighting, he has had to fight every single step of the way and that continues today."
Last month, Mr Pora won his High Court case challenging the $2.5 million compensation he was paid by the government for wrongful imprisonment.
The court found Mr Pora's compensation should have been increased to allow for inflation.
The compensation paid to him was based on 1998 guidelines that award $100,000 a year for loss of liberty.
The retired High Court judge who considered Mr Pora's compensation claim had recommended the figure take inflation into account but the government rejected that, saying the original offer was fair.
In a judgement released last month, Justice Ellis said the Cabinet guidelines do allow for inflation adjustment, where it is in the interests of justice to do so.
An assessment commissioned by Mr Pora's legal team suggests he should receive an extra $500,000 to $600,000 on top of the $2.5m paid out last year.
His lawyer Jonathan Krebs said last month that the guidelines for compensation permitted an adjustment for compensation and the High Court judgement had confirmed that.
Mr Krebs told Checkpoint with John Campbell at the time that he was urging Justice Minister Amy Adams to reconsider the earlier decision.
"Justice Ellis has said yes, that the Cabinet didn't have the right information before it when it made the decision not to inflation adjust and has sent it back for Cabinet to reconsider it."
Mr Krebs said the decision was enormous in terms of administrative law.
"Because what it says is that decisions of Cabinet can be reviewed when Cabinet is making decisions against a set of guidelines or criteria as they were doing here.
"Previous authority that says the High Court can't interfere with what Cabinet's decided has been overturned.
"It's new, and very big."
Mr Pora spent nearly 22 years in prison after he was convicted in 1994 for the killing and rape of Susan Burdett in Auckland two years before.
He was again found guilty at retrial in 2000 but the convictions were overturned in 2015 after the case went to the Privy Council in London.
Mr Pora and his legal team went to the High Court to challenge the amount paid. The court was told during the case the amount worked out to be less than the minimum-wage hourly rate.