The NSW government says public housing rents won't be increased until it finally decides whether to quarantine last year's $30 pension rise.
The federal government, pensioners' groups and the NSW opposition have all called on the state government not to increase rents, after a 12-month moratorium expired on Monday.
The NSW government agreed to temporarily exclude a one-off $30 increase from its rent calculations last year.
Twelve months on, there are fears pensioners could soon be slugged with a $18.60 fortnightly rent increase.
This would wipe out Monday's indexed welfare rise, which has seen single, aged and disability pensioners getting an extra $15 a fortnight and couples an additional $23.
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Federal Community Services Minister Jenny Macklin on Monday called on the NSW government to permanently quarantine the $30 increase, already agreed to by Queensland, South Australia, Tasmania and the Northern Territory.
"We've made it absolutely plain to the NSW government that we do not agree with them clawing back the pension rise," she told ABC Television on Monday.
"We delivered a historic increase to the pension last year and we want to see that pension rise in the pockets of pensioners, not going into increased housing rents.
"So, we'll be making our position absolutely clear to the NSW government."
A spokesman for NSW Housing Minister Frank Terenzini couldn't say when a final decision would be made although he said rents would not be increased in the meantime.
"Nobody's interested in dragging this out," he said.
"(Ms Macklin's) request is now being reviewed, and no rents will go up while that is being reviewed."
NSW Opposition Leader Barry O'Farrell said it was unfair to claw back the pension increase through rent hikes.
If the coalition won government next March, it would review the rental increase formula, he promised.
"We don't believe the one-off increases that are given to pensioners to recognise the increased cost of living ... should be clawed back by a state government to increase public housing rents," he said.
National Seniors Australia (NSA) said it was "unthinkable" that state governments would try to seize some of last year's pension increase through rent increases.
A Western Australian moratorium also expired on Monday, while Victoria and the ACT have only quarantined the $30 pension increase until next year.
"National Seniors fought hard to get this historic rise for pensioners last year and will not stand by and watch the state governments absorb it into state revenue in a move which can only be described as mean and insensitive," the group's spokesman Paul Versteege said.
"The NSW and the WA governments would do well to join Queensland, South Australia, Tasmania and the Northern Territory in quarantining the $30 a week pension increase from rent calculations."
