Child poverty has dropped back almost to pre-recession levels, as New Zealanders' jobs and incomes finally climb out of a five-year downturn.

The Ministry of Social Development's latest annual report on household incomes says the number of children in households earning below 60 per cent of the median wage fell by 25,000 to 260,000 last year, the lowest number since 2007 when there were 240,000 children in poverty.

The overall inequality rate measured by the Gini coefficient widened slightly, but the data has been volatile through the recession and the ministry said the trend line had been flat since the mid-1990s after a sharp increase in inequality in the decade before that.

However, beneficiaries slipped further behind average incomes because benefits are adjusted in line with prices, not incomes, so inequality worsened at the bottom of the income scale.


"While there is no evidence of growing income inequality in the population overall or between high income households and the rest in the last two decades or so, there is evidence here that there is a growing gap between the incomes of those heavily reliant on the safety net provided by main working-age benefits and the rest," the report says.

"Housing costs accounted on average for a much greater proportion of household income for low-income households in 2013 than in the 1980s. This increased cancelled out the gains in before-housing-costs incomes for low-income households, leaving after-housing-costs incomes for bottom decile households lower in real terms in 2013 than in the 1980s, and much the same for those in the second decile."

Social Development Minister Paula Bennett said the figures showed that Kiwi households had bounced back from the recession.

"In the past year 84,000 more jobs have been added to the New Zealand economy, 8,600 sole parents have come off benefit in the past year and there are nearly 30,000 fewer children in benefit dependent households compared to two years ago," she said.

"Nevertheless the Government recognises more needs to be done to support our most vulnerable families. Which is why, on top of free breakfasts to all schools that want it, a social worker in all decile 1-3 schools and warming up nearly 300,000 homes, we are in this year's budget investing nearly $500 million over four years in services and support for families."

But Unicef advocacy manager Deborah Morris-Travers said poverty rates were still much higher for children (22 per cent) than for any other age group, measured by those below 60 per cent of 2007 median incomes in 2013. Comparable rates for other age groups were 17 per cent for young adults aged 18 to 24, 16 per cent aged 25 to 44, 13 per cent aged 45 to 64 and 7 per cent aged 65 and over.

"Given what we know about the importance of a child's development when they are young, this failure to protect children from the harms of poverty is a costly mistake," she said.

The report effectively reverses an unexpected increase in child poverty reported in February, when officials discovered a mistake in previously reported data which pushed the number of children below the 60 per cent line up from 265,000 to 285,000.


The latest report confirms that children in poverty peaked at 300,000 in 2010 and has now fallen back two-thirds of the way to the 2007 level of 240,000.

The proportion of children in beneficiary families who earned below 60 per cent of the 2007 median dropped from 75 per cent in 2012 to 65 per cent last year as some beneficiaries found part-time work.

The proportion of children in working families below the same threshold was stable at 12 per cent.

On the same basis, child poverty rates dropped for most ethnic groups: from 17 per cent to 15 per cent for European children and from 34 per cent to 30 per cent for both Maori and Pacific. There was a slight rise in poverty from 27 per cent to 28 per cent for Asian and other ethnic groups.