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An international expert has upset the Government's welfare reform agenda by proposing a universal child allowance to tackle child poverty.

The head of social policy for the Organisation for Economic Cooperation and Development (OECD), Dr Monika Queisser, told a forum organised by the Government's Welfare Working Group yesterday how New Zealand was "out of step with other countries".

She backed up the working group's agenda of addressing New Zealand's relatively high rate of sole parents on benefits and rapidly growing numbers on invalid benefits. But she surprised officials by listing "high child poverty" as a third big issue for New Zealand social policy.

She said New Zealand could be proud of having one of the OECD's lowest poverty rates for the elderly, with only 2 per cent of over-65s living on less than half the median after-tax income here compared with an OECD average of almost 14 per cent.

But 15 per cent of Kiwi children lived in families with less than half the median income, compared with an OECD average of 12 per cent.

"The gap between material deprivation of children and older people is biggest in New Zealand out of 27 countries," she said.

She said the Labour Government's Working for Families package had stemmed the rise in child poverty but "has not reduced the high child poverty rate".

"More needs to be done on that front," she said.

"An integrated approach to reviewing the tax/benefit system is important. The countries in the OECD that have achieved low child poverty (the Nordic countries and France) often have universal child benefits, and that might be also an avenue that New Zealand might want to explore in more detail."

Child poverty campaigners at the forum welcomed her surprise suggestion. Massey University professor Mike O'Brien said: "They have put some stuff on the table that I don't think the minister wanted to hear."

Although New Zealand abolished the universal family benefit in 1991, Australian experts at the forum said Australia still had a near-universal component of family support payments as well as an income-tested component.

However, Australian economist Professor Bob Gregory noted that Australia also income-tested its old age pension, unlike New Zealand. He said it was not feasible to make all benefits universal.

"You can't say, 'Oh we're going to be top of everything [in OECD rankings], because usually being in the top means you spend a lot of money on it," he said.

Welfare Working Group head Paula Rebstock said New Zealand's current system "locks too many people into life on a benefit and robs them of their potential".

"For most people, real security is provided by the earnings, confidence, the social contact, better health and the future prospects that participation in the workforce offers."