Race Relations Commissioner Dame Susan Devoy says she found cartoons printed in two South Island newspapers personally offensive, but they were not racist.
The cartoons, by Al Nisbett, have been widely condemned on social networking sites as racist towards Maori and Pacific Islanders.
Dame Susan said at a press conference this afternoon that the cartoons did not breach the level considered to be racist under the Human Rights Act.
One of the drawings published in the Marlborough Express appeared to show a group of brown-skinned adults in school uniforms taking advantage of the breakfast in schools programme to save money for cigarettes, alcohol and pokies.
The other cartoon, printed in The Press showed a Maori or Polynesian family discussing how great the free breakfast programme would be to help them ease their poverty, while sitting in front of lottery tickets, cigarettes and empty beer cans.
Dame Susan said she was not aware of the cartoon published by the Press, but said she would be speaking with the Marlborough Express editor, Steve Mason.
But she said she only expected the editors would apologise if they felt they had been wrong in printing the cartoons.
She said the cartoon continued the stereotype of certain populations and "continues to stigmatise people who live in poverty, particularly children".
But she said it did not reach the high threshold considered to be racist in the Human Rights Act because they did not incite racial disharmony.
"We have the right to freedom of expression and we have the right to freedom of speech and people can say what they like and print what they like, even if we find it really offensive."
A lot of people agreed with the cartoons, Dame Susan said.
"I personally and those at the Commission don't [agree with the cartoons]. We do find it offensive, we find it quite insulting."
She encouraged anyone who was offended by the cartoons to contact the editors of the paper or the Press Council.
"People do need to stand up and say this isn't acceptable."
If the commission received enough complaints about the cartoons, even though they did not meet the threshold of being racist, they would take that to a "broader human rights issue''.
"If we have thousands of complaints about them there is obviously an issue there - we would say `Well, what can we do about that? Is the threshold too low? Or what else can we do'?''.
Dame Susan said the cartoons did not help race relations in New Zealand.
"We're on a long journey here to try and create racial equality and develop social cohesion and unfortunately you can never have one without the other.''
The man behind the image, cartoonist Al Nisbet, was surprised at the public outrage.
"I personally don't believe there's an extent of poverty in New Zealand that's implied. I keep hearing this thing about poverty and I keep thinking 'hang on, we've got a welfare state in New Zealand and we have safety nets'.
He denied the cartoon was racist.
"I made sure I put some Europeans in there because there's a lot of bludging whites as well.''
Mr Nisbet said Maori and Pacific Islanders were a focus in the cartoon was because most of the food in schools participants would be in Northland, where the cultures were prominent.
"You've got to get reaction you've got to push the envelope, because otherwise what's the point?''
The cartoon was also slammed as racist on Twitter, with some calling for an apology from the newspaper.
Ben Hurley described the cartoon as "racist in a hurry".
Green MP Catherine Delahunty tweeted "Thanks Marlborough Express 4 reinforcing racist, anti poor people and larger people meme - we really needed that".
Marlborough Express editor Steve Mason said the cartoon had got people talking.
"I'm really pleased that they feel able to comment on it.
"Cartoons are desgned to stimulate discussion and obviously that has worked in this case. So that's what it's all about," he said.
However, he said he was "quick to apologise if people are offended by it - that is certainly not the attention''.
He would consider a printed apology if his readers wanted it.
Maori Party MP Te Ururoa Flavell said the cartoon was "racist, full stop".
"In that case, get rid of it. Get it out of our newspapers and apologise, fess up and move on."'
Mr Flavell said the newspaper should be held to account and an apology from its editors would be "a very good starting point".
He hoped Dame Susan would do more than just talk, and take some action.
If the cartoon did not meet the threshold of racism, then the threshold needed to be decreased.
"On the face of it, most fair-minded New Zealanders would suggest that it is racist and has no place to be delivered in the newspapers of this country."
Mr Flavell said the Maori Party would soon be introducing a bill on institutional racism which would tackle some of the issues in the Human Rights Act.
National MP Tau Henare said people in positions of power, like a cartoonist for a newspaper, should know better.
"My message is to cut it out. Maori have had enough, and it doesn't matter whether I'm in the National Party, Labour Party whatever, I still owe my allegiance to my ancestry ... so I've had a gutsful."
Mr Henare agreed Dame Susan had not gone far enough.
Asked if the cartoon was racist, Mana Party leader Hone Harawira said: "Send it off to Susan Devoy, let her do something."
When told Dame Susan had said it did not meet the legal definition of racism, he said: "Good on her."
New Zealand First leader Winston Peters, when asked if the cartoon was racist, and said it was confusing and difficult to work out.
"That's not the way Maori and Pacific Island people dress, that's my problem with the inference."
Mr Peters said the cartoon was ambiguous.
"I can't really help you because I'm not an expert on how you interpret cartoons."