Labour is promising to extend a $60-a-week payment set up to help working parents so social welfare beneficiaries with children will also get it.
But it would take seven years to phase in the change.
The poverty alleviation plan highlights the difference between Labour's bid to make life easier for sole parents and National's cracking the whip to get them into work.
Labour deputy leader Annette King said extending the In Work Tax Credit to beneficiaries was "essentially a moral and ethical issue".
"It's unfinished business for a Labour Party."
But Prime Minister John Key said it would remove an incentive to work.
"If there is no difference between welfare and working, a lot of people won't work," he said.
Labour announced its child policy yesterday at Henderson North School in West Auckland, with All Black Jerome Kaino appearing alongside his uncle Su'a William Sio, the MP for Mangere.
Labour would also extend paid parental leave from 14 weeks to six months over two terms and explore the possibility of a year's paid parental leave.
That would cost $212 million over four years, and $686 million over seven years.
It is promising to restore the funding needed to ensure that all staff in early childhood education centres are professionally qualified, which it costs at $156 million over four years.
Pregnant women would get free dental treatment, addressing concerns that many premature births are linked to poor oral health.
And it would match National's policy of making 24-hour health care for children aged six free at a cost of $40 million over four years.
Those child-focused policies, with expansion to early intervention programmes, would cost $2.6 billion over seven years.
But the extension of the In Work Tax Credit to beneficiary families is at the heart of Labour's Child Policy.
Depending on which measure is used, between 170,000 and 270,000 children in New Zealand live in poverty, says Labour.
The extension of the tax credit would cost almost $400 million over the first four years but would be phased in over three stages and would cumulatively cost $1.13 billion by 2018, when it would be fully implemented.
Ms King said the payment would benefit 150,000 families and Labour claims the policy would "effectively eliminate child poverty in sole parent families once fully implemented".
She dismissed a suggestion it was an election bribe saying Labour had worked for three years on the policy, and it had not just been announced quickly.
"It's a six-year agenda for change."
It was affordable and it was a vital investment for the future.
In Government, Labour resisted repeated calls to extend the In Work Tax Credit (the old Child Tax Credits) to beneficiaries with children.
The Child Poverty Action Coalition has legally challenged the exclusion in the courts which found it was discriminatory, but lawful.
Paid parental leave
* Started on January 1 this year.
* 18 weeks' leave. Minimum wage of A$570 ($732) a week.
* Eligible if parent earned less than A$150,000 ($192,775) the previous year.
* Must have worked for at least 330 hours (one day a week) for 10 of the 13 months before to the birth or adoption of the child. If not eligible, may get a "baby bonus" of A$5294 ($6800) a year.
* Started in 2002.
* 14 weeks' leave on usual pay, up to a maximum of $441.62 a week.
* Parent must have worked for same employer for an average of at least 10 hours a week for at least six months immediately before the baby's due date.