New Zealand's Budget must report its effect on child poverty, but the Treasury model cannot forecast material hardship — the measure with a 6.0 percent target for 2027/28, provisionally at 14.3 percent on a new indicator in 2024/25

What is happening?

New Zealand sets child poverty targets in law and asks every Budget to say whether it moves them. The Child Poverty Reduction Act 2018 requires the government to set ten-year and three-year targets on four primary measures: material hardship, low income before housing costs, low income after housing costs, and persistent poverty. Section 15EA of the Public Finance Act, as quoted by the Treasury in its own report, requires the Minister of Finance to present a child poverty report on Budget day that discusses progress against those targets in the last financial year and states whether, and if so to what extent, measures in or related to the Budget will affect child poverty.

For material hardship the second half of that duty cannot be carried out with the tool the Treasury uses. In both the 2025 report (2025-05-22) and the 2026 report (2026-05-28) the Treasury states that its model is unable to forecast material hardship. It forecasts only the two income measures. The Controller and Auditor-General, in a report presented to Parliament in March 2025, records the same limit and extends it to persistent poverty.

Material hardship is the measure with the ten-year target of 6.0 percent for 2027/28. The rate recorded for 2024/25 is 14.3 percent, a provisional figure on the new MH-18 indicator. The final 2023/24 figure is 13.5 percent, and the 2017/18 baseline is 13.3 percent. All figures here are financial years running 1 July to 30 June.

Whose problem is this?

Hardship is not spread evenly. For the year ended June 2024, when the overall rate was 13.4 percent, the Auditor-General reports material hardship rates of 23.9 percent for Māori children, 28.7 percent for Pacific children and 22.6 percent for children in households with a disabled member. No source opened here names a separate public target for any of these groups; the statutory targets apply to all children.

The agencies that could close the gap are the same agencies that report on it, and none of them is obliged by any source opened here to build a forecast that does not yet exist.

Where does this problem end?

The two income measures sit beside material hardship as a contrast because they are the part of the same Budget day duty that the Treasury is able to model and to report on.

What is the state now, and what should it be?

Now

What it should be — stated only in the documents of the institutions involved:

The target table in the 2026 Treasury report places the same 6.0 and 11.0 figures beside the new MH-18 wording; no opened source says whether those figures were reset for the new indicator.

How big is it?

169,300 children, or 14.3 percent, in 2024/25 on a provisional basis. That is the count and rate published for the new MH-18 indicator, reproduced in the Ministry of Social Development report of July 2026 from Stats NZ figures and matched by the rate in the Treasury Budget day report.

A year earlier, for the year ended June 2024, the Auditor-General counted 156,600 children at a provisional 13.4 percent, a figure later finalised at 13.5 percent. The estimate for this dossier is therefore given as a range between those two published counts rather than a single figure.

The gap to the ten-year target is large on the numbers alone. A rate of 6.0 percent applied to about 1.18 million children would be roughly 71,000 children, against about 169,300 counted in 2024/25. The published severe material hardship figure for 2024/25 happens to be close to that, at 6.0 percent and about 71,000 children, but it is a different and narrower measure with no statutory target.

Depending on which measure is chosen, the Auditor-General reports that between 5.4 percent and 29.9 percent of children, or between 62,900 and 351,000, were in some form of poverty in the year ended June 2024.

Under what conditions does it arise?

1. The duty covers all measures but the model covers two. The Treasury model forecasts incomes, so it can estimate how tax and transfer changes shift the two income measures. Material hardship is counted as lacking a set number of listed items, seven or more of 18 on MH-18 and six or more of 17 on DEP-17, and the Treasury states it cannot forecast that measure. The duty in section 15EA is not limited to measures the model can reach.

2. The measures that might touch hardship are the ones left unmodelled. In the 2026 report, Budget measures such as social housing places, employment support for sole parents, school lunches and food hubs appear on the list of measures that are not able to be modelled. The Budget effects that are quantified are the tax and transfer changes, and those are quantified only on the income measures.

3. The definition sits outside the Act. The material hardship indicator is set by the Government Statistician rather than written into the statute. When the household survey moved to a new design, the old DEP-17 index was replaced by MH-18, approved in December 2025 and first published in February 2026. Stats NZ concluded that the new index keeps the hardship concept and ensures continuity. The targets set earlier were not visibly restated against it.

4. Targets can be reset, and progress reporting can be stopped. The Minister sets intermediate targets by Gazette notice and did so for the third period on 2024-06-27. The Auditor-General found that a tracker of the work programme stopped in mid-2023 and that the six-monthly reporting requirement for the strategy was removed in October 2024. Without a plan or a forecast, the main public signal is the annual figure, which arrives after the period it describes.

What has been tried?

Every attempt listed here either sets a target, reports a past value, or forecasts an income measure. None of the opened sources describes an attempt to forecast the effect of a Budget on material hardship itself.

What was found?

The two statements about the change in material hardship cover different periods and are both kept. The Auditor-General also found that measuring and reporting on child poverty is done well, and that roles are clear; the gap it identified is in planning and implementation, not in counting.

Why is it still unsolved?

Measurement absent — the Budget day duty asks for the effect of the Budget on child poverty, and the measure with a target and a current value that the Treasury cannot forecast is material hardship. Persistent poverty cannot be forecast either, but it is reported only from 2027.

The explanatory note to the 2018 bill as introduced describes the purpose of the Act as promoting political accountability against published targets, and the Budget day report is where a government states, before spending, what its choices will do to child poverty. For the income measures that works in practice, because a change in tax credits can be run through a model and returned as a change in the share of children below an income line. For material hardship the same question has no model to run through. The report can say what happened last year, but it cannot say what this Budget will do, so the statement required by section 15EA covers that measure only by saying that it cannot.

The absence compounds with the other two findings. Without a forecast there is no way to check a Budget against the 6.0 percent target in advance, and without an integrated implementation plan, which the Auditor-General found did not exist in March 2025, there is no document against which progress could be read. After the six-monthly strategy reporting was removed in October 2024, the annual Stats NZ figure is left as the main public signal, and it arrives about eight months after the year it measures.

The indicator change adds a third layer. The target numbers were set on the old index and now sit beside the new one without an opened source saying they were recalibrated. Stats NZ concludes that the concept is continuous, which is a statement about the measure, not about whether a 6.0 percent target means the same thing on both.

What observation would mean it is solved?

Candidates — (a) a Budget day child poverty report states a quantified estimate, with uncertainty, of the effect of Budget measures on material hardship (b) a published cross-agency implementation plan for reducing child material hardship, with regular progress reporting (c) the recorded material hardship rate moves toward the statutory targets.

(a) alone is weaker than it looks. An estimate can be produced for a narrow set of measures and still leave the unmodelled items, such as housing places and school food, outside it. The estimate is only as useful as its coverage of the measures that plausibly reach hardship.

(b) alone is paper. The Auditor-General asked for a plan, and a plan can exist without any forecast attached, which would leave the Budget day statement unchanged.

(c) alone arrives too late and moves for other reasons. The figure is published about eight months after each year ends, the 2024/25 value is still provisional, and the Treasury itself attributes part of the 2023/24 miss to high inflation. A fall in the rate would not show whether any Budget choice caused it. The three have to be read together.

What is it connected to?

What these sources do not say

• Whether the 6.0 percent or 11.0 percent material hardship targets will be met. No official forecast exists for these targets. The Treasury says its model cannot produce one, and the Auditor-General judgement that two targets are unlikely to be met in 2027/28 refers to the income measures, drawing on the 2023 and 2024 Budget day reports. Statements elsewhere that the material hardship target will be missed are not official forecasts and are not repeated here.
• Any public response to the Auditor-General recommendations. The overview notes that officials were finalising new monitoring and reporting arrangements. What came of that, and whether the Ministry of Social Development or Cabinet has published an integrated implementation plan, was not found in any source opened here. The Priority 2 page of the Ministry lists four policy groupings but no timetable or reporting framework.
• Whether the Minister reported to Parliament on the missed targets. The Auditor-General summary and the 2018 explanatory note describe a duty to report when targets are not met; no such report was found, and the sources do not say whether the inflation sentence in the Treasury 2025 report is that explanation.
• Whether the targets were reset for MH-18. The Stats NZ page on interpreting the targets after the 2026 update could not be opened.
• How large the revision to the 2024/25 provisional figure will be. The next release is due in 2027-02.
• Whether the quarterly lead indicators given to the Minister substitute for a forecast. Those indicators exist according to the Ministry reporting page; their content was not examined.
• The statute text itself. Section numbers are taken only where the Treasury, the Ministry and the Gazette cite them; the legislation sites refused automated access, and the 2018 explanatory note is the bill as introduced, not confirmed against the Act as passed.
• The position of the institutions named. What was found is carried here: the Treasury 2026 report says the government focuses on long-term drivers and on opportunities to move out of poverty, citing social investment and a stronger economy; the government said in 2024 that it wanted the targets to be achievable; the Child and Youth Strategy names material hardship as a priority. No published response to the missing hardship forecast itself was found.

See the evidence

Of the 26 rows, 17 were opened and 9 could not be. The two Treasury Budget day reports and the Stats NZ methodology were read in full; the Auditor-General report was read in its overview, recommendations, parts of Parts 1 and 2 and the appendices, and Part 3 was read directly. Where two sources give different figures for the same year, both are kept with their status: 2023/24 appears as 13.4 percent provisional in the Auditor-General report and the Treasury 2025 report, and as 13.5 percent final in the 2026 Treasury and Ministry reports. The 2024/25 value is provisional and on a different indicator from the one in force when the targets were set. This is a research-based definition, so observation_refs is empty and provenance_mode: press-derived.

People affected

Estimated range 156,600–169,300 As of years ended June 2024 and June 2025

Sensitivity The range spans two adjacent years and two indicators, DEP-17 and MH-18, which Stats NZ says keep the same hardship concept; it is not a sampling interval, and no source opened gives one. Both endpoints were published as provisional, and the 2024/25 figure may be revised in 2027-02. The count covers children in material hardship only; it excludes children who are in low-income households but not in hardship, and it does not count persistent poverty, which is reported from 2027. Using the widest set of measures instead, the Auditor-General reports between 62,900 and 351,000 children in some form of poverty in the year ended June 2024.

Regional breakdown The sources opened give national counts and rates by group, such as ethnicity and disability in the household, but no regional counts of children in material hardship; national values are not split by population share.