Politicians from both sides have been pushing for a boost to superannuation entitlements, which were cut by Mr Howard in 2004 in a bid to match a promise by then Labor leader Mark Latham.
The changes only applied to politicians entering parliament after the 2004 federal election.
Mr Howard said he would introduce laws to adjust the level of politicians' superannuation to 15.4 per cent, the same level paid to commonwealth public servants.
The government will also introduce a new resettlement allowance which will provide nearly $30,000 if MPs are lose their jobs due to involuntary retirement, such as losing preselection or defeat at the next election.
Mr Howard said the initiatives followed a joint approach by the chief government and opposition whips to the Remuneration Tribunal.
Opposition Leader Kim Beazley had indicated his support for the arrangements for the proposals, he said.
"Unpopular though it may be with some, I do not believe members of parliament, particularly at a senior level, are overpaid," Mr Howard said.
"I think the burdens carried by senior ministers and by senior office holders in the opposition are greater than many in the private sector who are far more highly paid than what they are.
"I think that has to be said, in the longer term health of the parliamentary system. If we continue to engage in this mindless populism on the issue we will end up further reducing the quality of the gene pool of candidates available for high office, particularly at a time when salaries and remuneration in booming sections of the economy are so attractive."
Democrats, Greens reject boost
Democrats leader Lyn Allison said it didn't make sense to have two levels of payments and although says she wants equal entitlements for all existing parliamentarians, she said it did not need to mean increased superannuation benefits.
"It's still a very generous entitlement, even with the changes, so we would oppose any further changes," she said.
Australian Greens leader Bob Brown said he was not surprised the issue had been brought up.
"The difference in payments to MPs is arguably unconstitutional," he said, adding that politicians' superannuation benefits should be brought in line with the rest of the Australian workforce.
"I think MPs are extremely well paid. We're in the top 3 or 4 per cent of salary earners," Senator Brown said. “Of course, the tendency is to say, well MPs should be compared to the CEOs, but I think what CEOs are getting in this country, including failed CEOs, is outrageous."