An international report has found that a sixth of New Zealand children are being raised in poverty - a higher rate than in all but three of the world's 26 rich nations.

The Innocenti Research Centre, established by the United Nations Children's Fund (Unicef), says 16.3 per cent of New Zealand children in 2001 lived in homes that earned less than half the national median income.

Only Mexico, the United States and Italy had higher rates of child poverty.

The "child poverty league table", which includes New Zealand for the first time, was published in Italy last night, just six months before Labour Prime Minister Helen Clark is due to face a general election.

Before the last election in 2002, her Government promised to eliminate child poverty, but did not set a deadline.

Social Development Minister Steve Maharey said yesterday that the "Working for Families" package in last year's Budget, including higher family support and a new "in-work payment", would slash child poverty by 70 per cent when fully implemented in 2007.

His ministry estimated last year that the package would reduce the proportion of children in homes earning under half the median income from 14.7 per cent this year to just 4.3 per cent by 2007.

If no other country reduces its poverty rate, that would place New Zealand's child poverty fifth-lowest in the world by 2007, better than in all countries except the Scandinavian nations of Sweden, Norway, Finland and Denmark.

Unicef New Zealand spokeswoman Beth Wood accepted the ministry's estimate and said the Budget "represents a significant move to reduce child poverty for some families".

But she said the package would still leave many children of beneficiaries living in poverty because their parents would not get the new in-work payment.

Both the ministry's estimates and the Unicef report, which uses the ministry's figures for New Zealand, show the proportion of children living in poverty rose during the 1990s, from about 5.5 per cent in 1990 to about 14 per cent this month, reflecting the 1991 benefit cuts and a freeze in family support rates from 1998 until the beginning of next month.

The Unicef report also shows that in 2001 New Zealand was second only to Mexico in the proportion of children living in homes earning less than half the median income before taxes and family support were taken into account - a measure of inequality in "market" earnings.

New Zealand's more generous family support system improved its ranking slightly after bringing in taxes and support payment.

The US slipped down the ranks on this score because of its more restrictive child support system.

The report found that the proportion of children growing up in poverty rose during the 1990s in 17 out of 24 countries for which long-term figures were available.

In contrast, the biggest improvement in the decade was in Britain, where Unicef estimates that Labour Prime Minister Tony Blair's pledge to cut child poverty by a quarter by this year "is likely to have been met".

Mr Blair has also pledged to halve child poverty by 2010 and to eliminate it by 2020.

New Zealand was one of seven countries that cut its welfare spending during the 1990s as a proportion of the national income, from 21.9 per cent in 1990 to 19.2 per cent in 2000.

International league

Percentage of children in homes earning under half the median income:

1. Denmark 2.4
2. Finland2.8
3. Norway 3.4
4. Sweden 4.2
5. Switzerland 6.8
6. Czech Republic 6.8
7. France 7.5
8. Belgium 7.7
9. Hungary 8.8
10. Luxembourg 9.1
11. Netherlands 9.8
12. Germany 10.2
13. Austria 10.2
14. Greece 12.4
15. Poland 12.7
16. Spain 13.3
17. Japan 14.3
18. Australia 14.7
19. Canada 14.9
20. Britain 15.4
21. Portugal 15.6
22. Ireland 15.7
23. New Zealand 16.3
24. Italy 16.6
25. United States 21.9
26. Mexico 27.7