Prime Minister Tony Abbott has confirmed that the government will not go through with the proposed changes to defence allowances.
Speaking to media on Monday, Mr Abbott confirmed that the restoration of allowances would come out of the existing defence budget.
Discretionary leave, food and motor vehicle allowances will be restored, but the initial pay offer of 1.5 per cent remains, he said.
"While we would like to pay our ADF personnel more, we simply can’t give what we do not have," he said.
Mr Abbott was due to meet with Senator Jacqui Lambie over the pay deal on Monday, but the meetiong has been postponed.
"We haven't been able to meet all of her requests," he said.
Senator Lambie, whose criticism of the deal sparked her public split from the Palmer United Party, said she would not be satisfied with “any result short of a total victory in the ADF Fair Pay War”.
Speaking to media on Monday, she said she was "very disappointed" over the postponed meeting.
"It's another slap in the face," she said.
'I did have a meeting with the devil himself'
Senator Lambie also met with the leader of her former party on Sunday night.
She confirmed she met with Clive Palmer in Canberra to secure his support for her push on defence pay, telling journalists she was keen to keep up communication.
"I did have a meeting with the devil himself," she said.
"But I won't be selling my soul."
In a statement issued on Sunday, Senator Lambie said her negotiations would be “all or nothing”.
“I’m not going to take any prisoners,” she said.
“It’s time to empty the magazine, fix bayonets and charge. Our Diggers have done a magnificent job for Australia and deserve a fair wage rise, which keeps track with inflation and returns all their holidays and allowances.”
'It’s time to empty the magazine, fix bayonets and charge'
Opposition Leader Bill Shorten has also put pressure on Mr Abbott over negotiations, calling the Government's initial offer – which sits below inflation - shameful.
Mr Shorten said Mr Abbott has “until the end of the day” to address criticism.
“The deadline for the Prime Minister to write to the Defence Force Remuneration Tribunal is December 1,” he said.
“Funding for a fair pay deal for our service men and women is already in the budget… Our service men and women shouldn’t have to fight the Abbott Government for decent pay and conditions.”
