In Queenstown yesterday, Mr Luxon was grilled by media at iFly Queenstown over his decision to claim the optional accommodation payment.
He reiterated, frequently, it was part of an entitlement for any MP or minister who resided outside Wellington, stating he was "entitled to the entitlement that everyone else has".
But later in the day, in a radio interview, he said he would would pay back his accommodation allowance.
He said he would pay back $13,000, which had only just been deposited into his bank account recently.
"As I came away [from the Queenstown press conference] I thought ‘Wow, people are pretty fixated on the allowance’. I thought ‘What’s going on?’."
Mr Luxon said he then heard the discussion on talkback.
He then changed his mind about the allowance.
"For me, I’m well within the rights, and well within the rules, but frankly it’s a distraction - I will live on my own costs," Mr Luxon told NewstalkZB host Heather du Plessis-Allan.
"It’s clear that the issue of my accommodation allowance is becoming a distraction," he said.
"As such, I have decided today that I will no longer claim the allowance and will repay anything I have received since I became Prime Minister."
It outlined a series of "long-standing maintenance issues" which needed to be addressed before he could move in, and therefore he was living in his apartment.
"Obviously the challenge is successive prime ministers who don’t spend the money on the maintenance and upkeep [at Premier House] - if we do need a new roof, to paint, new windows and those sorts of things - it’s challenging to be able to make that all come together.
"We’re working our way through it, working out what’s the minimum we can do to it to get it ready and so as soon as we can, we’ll be in there."
Mr Luxon believed New Zealanders would like the government to keep the 150-year-old property. The alternative was to sell it, but for that to happen a regular programme of maintenance and repairs needed to be maintained.
Mr Luxon’s claiming of the accommodation allowance had come in for fierce criticism from the Opposition.
Mr Hipkins said he did not think Mr Luxon should take the allowance, given he could live in Premier House for free.
"Christopher Luxon is treating hard-working Kiwis like a bottomless ATM. He needs to apply his own tough love standard to himself," he said.
"I think it’s absolutely hypocritical for Christopher Luxon to be saying that every other New Zealander needs to stomach cuts while he’s claiming $52,000 a year."
When asked if a proposed visitor levy for Queenstown was off the table - something the previous government had indicated support for before the Covid pandemic - or what alternatives may be available to fund costly infrastructure upgrades required, Mr Luxon said the government was open to Sovereign Wealth Fund money, overseas money, pools of capital from within New Zealand, public-private partnerships and toll roads.
"All of those options are one the table."
On this week’s news Warner Bros Discovery plans to close Newshub, Mr Luxon said it was "incredibly shocking and sad".
"We clearly have big challenges in our media environment, not just here in New Zealand but all around the world, where consumers have changed the way in which they’re consuming media.
"The traditional advertising revenue models have broken down and media organisations need to develop new business models and organisational models to deal with that.
"You’ve got a situation here where one of the largest media companies in the world ... has actually struggled to make the operation model work here in New Zealand and it’s incredibly sad."
He said it was important there was a plurality of media voices in New Zealand and expected Broadcasting Minister Melissa Lee to provide an update to Cabinet on Monday regarding the existing state of the sector, policies, thoughts and "direction of travel" in future.
- Additional reporting RNZ and The New Zealand Herald
