The number of Kiwi children in relative poverty has jumped over 300,000 for the first time since 2010 - but it's because of record inequality, despite falling absolute hardship.

The Ministry of Social Development's annual household incomes report shows that the numbers below a European standard measure of absolute hardship, based on measures such as not having a warm home or two pairs of shoes, fell from 165,000 in 2013 to 145,000 (14 per cent of all children) last year, the lowest number since 2007.

Children in benefit-dependent families also dwindled from a recent peak of 235,000 (22 per cent) in 2011, and 202,000 (19 per cent) in 2013, to just 180,000 (17 per cent) last year - the lowest proportion of children living on benefits since the late 1980s.

But inequality worsened because average incomes for working families increased much faster at high and middle-income levels than for lower-paid workers.


The net result was that the number of children living in households earning below 60 per cent of the median income after housing costs jumped from a five-year low of 260,000 in 2013 to 305,000 last year, the highest since a peak of 315,000 at the worst point of the global financial crisis in 2010.

In percentage terms, 29 per cent of Kiwi children are now in relative poverty, up from 24 per cent in 2013 and only a fraction below the 2010 peak of 30 per cent.

The report stresses that this is only one measure of relative poverty. Other measures, counting the numbers of children in households below 50 per cent of the median, or below 60 per cent of a fixed 2007 median, also show increased relative poverty last year, but the increases were smaller than for the measure based on 60 per cent of the current median income which is used by the Children's Commissioner and Otago University.

Unicef national advocacy manager Deborah Morris-Travers said the increase showed that the Government's reliance on economic growth as the way out of poverty "does nothing for those on benefits and on very low fixed incomes".

"The increase in poverty announced today is clearly unacceptable by anyone's standards," she said.

Council of Trade Unions economist Dr Bill Rosenberg said: "Rising inequality means that even if the economy is growing, the income from it is not being fairly shared."

shows that real household incomes, adjusted for the number of people in each household, jumped by 5.9 per cent for both the two highest income groups last year, when dairy prices were still at record levels, immigration was surging and Auckland house prices were taking off.

The household income higher than 90 per cent of households, the top income group in the report, rose from $71,200 in 2013 to $75,400 per adult-equivalent after adjusting for consumer prices and numbers of people in each household.

The income higher than 80 per cent of households rose from $55,800 to $59,100.
The median household income also rose by 5 per cent, from $34,000 to $35,700 for each adult-equivalent (children are counted as costing between a quarter and four-tenths of an adult, depending on the numbers of children and adults in the household).

But the income higher than the bottom 20 per cent of households, the lowest figure reported, barely inched up by just 0.5 per cent from $21,200 to $21,300 for each adult-equivalent, indicating that wages rose much less in low-paid jobs than in highly paid professions.

The report does not include figures for the poorest 10 per cent of households, who include most beneficiaries, because the names of benefits changed in 2013 and some beneficiaries appear to have reported only how much they received since the new benefit names were created, missing out their incomes for the first half of the 2013-14 year.

The net effect is that the ratio of the incomes higher than 80 per cent of households to the incomes higher than 20 per cent of households, an inequality measure known as the "P80:P20" ratio, rose to its highest level since the ministry's records began in 1982.

The ratio rose from a low of 2.19 in 1986 to a peak of 2.74 in 2004, then declined after the introduction of Working for Families, and rose again in the recent recession to 2.67 in 2011. It has now jumped again to 2.78.