Part 2: Arrangements to reduce child poverty
2.1
In this Part, we describe the legislative requirements related to reducing child poverty, the multiple measures and indicators used, the roles of the agencies, and the changing governance arrangements.
2.2
The arrangements to reduce child poverty include:
- three Acts that set out roles and responsibilities;
- multiple measures and indicators of child poverty; and
- multi-level governance and management arrangements.
Legislation sets the roles and responsibilities for reducing child poverty
2.3
Three Acts of Parliament set out requirements designed to ensure that there is public accountability for reducing child poverty. They are the Children's Act 2014, the Child Poverty Reduction Act 2018, and the Public Finance Act 1989.
The Children's Act 2014
2.4
The Children's Act 2014 requires the Government to adopt, publish, and review a strategy to improve children's well-being, with a particular focus on children with greater needs. The strategy must reduce child poverty and mitigate the impacts of socio-economic disadvantage.
2.5
The strategy adopted under the Children's Act was updated in November 2024 and is called The Child and Youth Strategy 2024-2027 (the Strategy). The Strategy has three priorities, and the one most relevant to child poverty is "reducing child material hardship".
2.6
The Strategy has six outcome areas. The outcome that is most relevant to material hardship is that "children and young people have what they need".6
2.7
See Appendix 4 for an overview of the Children's Act's requirements relevant to reducing child poverty.
The Child Poverty Reduction Act 2018
2.8
The Child Poverty Reduction Act 2018 requires the Minister for Child Poverty Reduction to:
- set intermediate (three-year) and long-term (10-year) targets for the four primary child poverty measures set out in the Act;
- identify broader indicators related to child poverty to monitor and report against; and
- prepare annual monitoring reports on those identified indicators related to child poverty after the Government Statistician has published their report on estimates of child poverty rates.
2.9
See Appendix 4 for an overview of the Child Poverty Reduction Act's requirements.
The Public Finance Act 1989
2.10
The Public Finance Act 1989 requires the Minister of Finance to produce an annual Budget Day Child Poverty Report. The report must:
- discuss any progress in reducing child poverty that has been made in the most recently completed financial year, consistent with the targets under the Child Poverty Reduction Act; and
- indicate whether and to what extent measures in, or related to, that year's Budget will affect child poverty.
There are multiple measures, targets, and indicators
2.11
To track progress in reducing child poverty, the Child Poverty Reduction Act sets measures and requires the Minister to set targets for the four primary measures, to identify child poverty related indicators (the indicators), and to prepare monitoring reports.
Primary child poverty measures and their targets
2.12
The four primary measures required by the Child Poverty Reduction Act are:
- BHC50: The percentage of children living in households that have less than 50% of the median household income before deducting housing costs (BHC) for the financial year of measurement.7
- AHC50: The percentage of children living in households that have less than 50% of the median household income after deducting housing costs (AHC) for the 2017/18 base financial year, adjusted for inflation.
- Material hardship: The percentage of children living in households that lack six or more essentials, such as not having two pairs of shoes in good condition or putting off doctor visits.
- Persistent poverty: The percentage of children living in households that have less than 60% of the median household income before housing costs are deducted in the financial year of measurement and for at least two of the previous three years.8
2.13
The persistent poverty measure has only recently been defined and had its targets set, so results are not yet being reported. The Government Statistician plans to provide estimates for persistent poverty for the years ended June 2024 and June 2025, ahead of ongoing annual reporting required by the Child Poverty Reduction Act from early 2027.
2.14
Figure 2 sets out the baseline child poverty rates and the intermediate and long-term targets for the four primary measures. The baseline rate for the first three measures is the rate from 2017/18. Because it was recently defined, the persistent poverty measure's baseline rate is from 2022/23.9 The percentages are the proportion of children living in households that meet the definition for that measure of child poverty.
Figure 2
Baseline rates of child poverty and the intermediate and long-term targets for the primary measures
| Primary measure | Baseline rate | Target rates for child poverty | ||||
|---|---|---|---|---|---|---|
| 2020/21 | 2023/24 | 2026/27 | 2027/28 | 2034/35 | ||
| BHC50 | 16.5% | 10.5% | 10% | 12% | 5% | -- |
| AHC50 | 22.8% | 18.8% | 15% | 14% | 10% | -- |
| Material hardship | 13.3% | 10.3% | 9% | 11% | 6% | -- |
| Persistent poverty | 9.4% | -- | -- | -- | 10% | 8% |
Note: In June 2024, the Government set a third set of intermediate targets (for 2026/27). The 2026/27 targets for BHC50 and material hardship are less ambitious than the earlier targets. The Government has stated that it wants to make the targets achievable. The 10-year targets to 2027/28 remain unchanged. All targets are published in the New Zealand Gazette (see gazette.govt.nz).
2.15
Three primary measures (BHC50, AHC50, and persistent poverty) are income-based measures. They measure household income relative to median income levels.10
2.16
Material hardship is not an income measure. It represents the day-to-day living conditions of households, such as whether they can meet basic needs for food, clothing, accommodation, heating, and transport.
2.17
In 2023, a briefing to the incoming Minister for Child Poverty Reduction noted that the income-based measures can be affected by directly adjusting incomes (for example, by raising benefits or minimum wages). The after-housing cost measure, AHC50, can also be influenced by policies that reduce housing costs. Material hardship can be reduced by:
- increasing income from welfare or employment, and/or reducing housing costs; and
- influencing a range of other factors, such as assets, demands on the household budget, the household's ability to manage resources, and support networks.
2.18
All the child poverty measures require a focus on the wider underlying causes of poverty, which take longer to influence. This is also true for mitigating the impacts of socio-economic disadvantage, including tackling chronic or multiple disadvantages.11
2.19
All the child poverty measures are sensitive to wider economic conditions. Information that the Treasury provided to us indicates that factors such as inflation, interest rates, and overall economic conditions can significantly affect child poverty rates. Agencies emphasised to us that these factors can sometimes outweigh the effects of targeted policy interventions.
Indicators related to child poverty
2.20
The broader indicators related to child poverty measure the impacts of socio-economic disadvantage and relate to the wider causes and consequences of poverty. Cabinet agreed to updated indicators in October 2024.12 The updated indicators are:
- children in benefit-dependent households;
- housing affordability;
- school attendance;
- school achievement; and
- potentially avoidable hospitalisations.
2.21
Appendix 2 describes all 10 measures from the Child Poverty Reduction Act and the five indicators related to child poverty.
Four agencies have played central roles
2.22
At the time of our fieldwork, four agencies played central roles in co-ordinating the government's efforts to reduce child poverty.
2.23
The Department of the Prime Minister and Cabinet was the original system convenor of the Strategy. It was also the lead advisor to the Minister for Child Poverty Reduction and a joint lead for the Strategy's child poverty priority.13 It held these roles until late April 2024.
2.24
MSD is now the lead agency for overseeing the Strategy and its child poverty priority to reduce child material hardship. MSD carries out its role through the Child Wellbeing and Poverty Reduction Group, which moved from the Department of the Prime Minister and Cabinet to MSD in April 2024.
2.25
MSD produces reports that provide relevant information and analysis about child poverty in New Zealand, including longer-term trends, demographic breakdowns, and international comparisons.14
2.26
Statistics New Zealand supports the Government Statistician to collect and publish child poverty statistics every financial year. The Child Poverty Reduction Act requires the Government Statistician to consult the chief executive of MSD before Statistics New Zealand publishes the annual child poverty statistics.
2.27
Under the Child Poverty Reduction Act, the Government Statistician is responsible for:
- setting definitions and concepts for the Act's operation;
- the data and statistical methodology used to produce child poverty estimates;
- reporting on child poverty estimates each financial year; and
- reporting on whether child poverty targets were or were not met at the end of a target period.
2.28
The Treasury supports the Minister of Finance by producing the annual Budget Day Child Poverty Report. The Treasury has used its Tax and Welfare Analysis modelling to estimate whether the child poverty targets for two of the income-based measures will be met.
2.29
As well as these agencies, many other public organisations have a role in leading individual initiatives that help to reduce child poverty and mitigate the impacts of socio-economic disadvantage. For example, the Ministry of Health has a role in reducing potentially avoidable hospitalisations and the Ministry of Education has a role in improving children's school attendance.
2.30
Individual initiatives each have their own governance arrangements. They are overseen by the Minister and chief executive of the public organisation leading them.
2.31
The work of these other public organisations and Ministers is vital for reducing child poverty, but we did not focus on them for this report. Our work focused on the agencies that are central to the governance, management, monitoring, and reporting of the overall work programme.
Governance arrangements continue to evolve
2.32
The Children's Act requires the Strategy to be reviewed every three years. The Department of the Prime Minister and Cabinet carried out the first review of the then Child and Youth Wellbeing Strategy and reported the results to the Minister for Child Poverty Reduction in August 2022. When we did our fieldwork in 2023 and 2024, changes from the 2022 review to improve the governance arrangements were still being embedded.
2.33
When we wrote this report, officials were considering further changes to the governance arrangements to support the implementation of the updated Strategy. In the following paragraphs, we describe the governance arrangements that are currently in place.
2.34
The Minister for Child Poverty Reduction is responsible for administering the Child Poverty Reduction Act and ensuring that its requirements are met. They are also the responsible Minister for adopting and publishing the Strategy.
2.35
The Minister for Child Poverty Reduction chairs the Child and Youth Ministers Group.15 This Ministerial group provides oversight of the Strategy, including the priority to reduce the number of children living in material hardship.
2.36
Chief executives of social sector agencies help to oversee and co-ordinate numerous cross-agency priorities, including the Strategy. They are supported in this role by their deputy chief executives. The general managers of social sector agencies meet regularly (about monthly) to specifically discuss Strategy-related matters.
2.37
The Child Wellbeing and Poverty Reduction Group in MSD supports the Minister for Child Poverty Reduction in their roles as Minister responsible for the framework established in the Child Poverty Reduction Act, Minister responsible for the Strategy, and chairperson of the Child and Youth Ministers Group.
2.38
The Child Wellbeing and Poverty Reduction Group has several important functions. These include:
- advising – providing policy advice that supports informed decision-making on reducing child poverty;
- monitoring – monitoring child poverty and well-being, assessing progress, and identifying what is working and where additional attention is needed;
- stewardship – acting as a steward for the legislative frameworks and implementation approach for reducing child poverty and improving well-being in line with the priorities and outcomes in the Strategy; and
- engagement and communication – promoting and communicating the outcomes and priorities under the Strategy and working with others to identify wider opportunities to support their achievement.
The updated Strategy has a stronger focus on material hardship
2.39
The Strategy was updated in November 2024 to better align with the Government's priorities and its intention to adopt a social investment approach.16 The Strategy will be used to guide Ministers' investment decisions on matters relevant to children's well-being, including child poverty. It is also intended to enable better co-ordination of efforts across agencies and ministerial portfolios.
2.40
Significant changes to the Strategy relevant to child poverty are:
- A bigger focus on material hardship – The Strategy's child poverty priority is now "reducing child material hardship".
- A more explicit focus on the causes of long-term disadvantage and hardship – One of two initial focus areas of the new material hardship priority is addressing the causes of long-term disadvantage and hardship. The revised indicators (see paragraph 2.20) will be used to measure progress, alongside other measures in the Strategy such as food insecurity and mental health.
- Implementation to be guided by investment principles – 10 investment principles will guide decisions on investing in future initiatives to reduce child poverty. These principles include that the investment will:
- improve outcomes for children and young people who data and evidence identify have the greatest needs and/or are at risk of poor long-term outcomes;
- seek to address disparities in outcomes; and
- provide opportunities for decision-making, design, and delivery of services and interventions to occur at local and iwi level.
2.41
The Government has also set nine targets for the public service to focus on. Reducing child poverty is not one of the targets. However, some of the nine targets are broadly aligned with the longer-term causes and consequences of poverty (such as fewer people on the Jobseeker Support Benefit, increased school attendance and achievement, and fewer people in emergency housing).
2.42
The full implications of these and further proposed changes to the child poverty arrangements are not yet known. However, our work points to the need to strengthen governance and management arrangements to support sustained progress.
6: The other five outcome areas are that children and young people are: "loved, safe, and nurtured", "happy and healthy", "learning and developing", "accepted, respected, and connected", and "involved and empowered". (See New Zealand Government (2024), The Child and Youth Strategy 2024-2027, at msd.govt.nz.) These other outcome areas are also relevant to children's future earning capacity and the likelihood of being in poverty.
7: For all the income-based measures, income refers to equivalised disposable household income. This is explained in Appendix 2 and in more detail by Statistics New Zealand (2024), "How we measure child poverty", at stats.govt.nz.
8: The Child Poverty Reduction Act provides definitions for BHC50 and AHC50. Material hardship and persistent poverty are defined by the Government Statistician rather than in legislation.
9: The baseline estimate for persistent poverty was intended as a guide for target setting, and Statistics New Zealand notes that it should not be treated as an official statistic.
10: BHC50 is determined relative to the median equivalised disposable household income in the year of measurement (a "moving line" measure). AHC50 is determined relative to the median equivalised disposable household income in the 2017/18 base year, adjusted for inflation (a "fixed line" measure).
11: Smith, J (2023), "Persistent disadvantage in Aotearoa New Zealand", Policy Quarterly, Vol 19(4): 15-21, page 20, at ojs.victoria.ac.nz.
12: Until October 2024, the five indicators were housing affordability, housing quality, food insecurity, regular school attendance, and potentially avoidable hospitalisations.
13: At the time, the child poverty priority was "reducing child poverty and mitigating the impacts of socio-economic disadvantage".
14: MSD published Child poverty in New Zealand reports in 2021, 2022, and 2024. It has also published a series of Household incomes in New Zealand reports, which provide information on the material well-being of New Zealanders since 1982.
15: Ministerial portfolios represented on this group are: child poverty reduction; social development and employment; health; education; children; police; justice; youth; mental health; finance; social investment; housing; and Māori development. Under the previous Government, the relevant Ministerial group was the Child and Youth Wellbeing Strategy Ministerial Group, which included many similar portfolios.
16: The social investment approach uses data and evidence to better understand people's needs, and what works to meet those needs, and then adjusts services accordingly. See Social Investment Agency (2024), "Social investment approach", at sia.govt.nz.