Child poverty, social determinants of health, and the limits of balance sheet thinking

Child poverty in New Zealand remains persistently high, with growing evidence that it is a key driver of health system demand and long-term economic cost.

‘One in seven New Zealand children living in material hardship’ was the dramatic heading of a NZ Herald feature article published on 26 February.

The figure was based on the latest Statistics NZ child poverty data for the year ended 30 June 2025: Latest child poverty data. This data has been collected since 2018.

The article was written by the newspaper’s multimedia journalist Julia Gaben: 1 in 7 children living in poverty.

Beginning with discussing child poverty in this post, I then consider why it is avoidable before moving on to consider first its relevance to the health system through the external social determinants of health and then the limitations of balance sheet analysis.

The scale of child poverty in New Zealand

The one in seven figure is substantively unchanged, but no doubt persistent or entrenched for those living without the basics. Statistics NZ advise that they intend to add persistent poverty to their future data collection.

Unsurprisingly Māori (one in four), Pacific (one in three) and disabled (one in four) children are disproportionately affected.

In other words, around 14% of children in Aotearoa New Zealand are living in material hardship. They either lack or cannot afford certain basic items or services such as food and clothing.

Characteristically, to keep costs down, they are putting off doctor visits or putting up with cold weather.

Of course, this data is expressly limited to child poverty. But children have parents who are also likely to be living poverty. There are also adults without dependent children who are impoverished. Despite this limitation the data provides an invaluable barometer.

Child poverty is a policy choice

Child poverty is not inevitable. Rather it is the consequences of economic and political choices that governments make.

There is considerable variation in child poverty rates between countries. Denmark, for example, as a country similar to New Zealand has a child poverty rate of around 4-5%.

Max Rashbrooke is a senior research fellow in the School of Government at Victoria University. He is a respected authority on public policy and inequality.

Writing in The Spinoff (27 February) Rashbrooke critically analyses the child poverty data: Entirely avoidable.

In his words:

Nonetheless, our politicians accept child poverty rates three times worse than those that affect children in other countries, or indeed pensioners in our own fair land. Our alarming rates of child poverty are entirely avoidable – and yet we continue not to avoid them.

Rashbrooke describes the data as effectively a report on the first year of the National-NZ First-ACT coalition government’s policies. Again, in his words:

It shows there are still nearly 150,000 children in poverty – roughly the population of Tauranga, or enough to fill Eden Park three times over. Essentially nothing changed in that first year – on this measure.

After discussing what is behind this high level of poverty, he then moves to what might be done to address it; largely income related and cheaper housing policies. Rashbrooke does not pull his punches in his concluding paragraph:

Poverty is not inevitable, in other words. Such wide variation across countries and age brackets tells us it is a matter of policy – of, in short, choice. Those who care about the issue must remind voters and politicians, in an election year, that this choice remains one of the most crucial the country faces.

Poverty as the primary driver of health demand

While governments can control access to health services through restriction, they can’t control all health demand. Access can be controlled for diagnosis and non-acute care such as planned or elective surgery. However, patients are the big losers of this control.

However, governments can’t control overall health demand and consequential cost. The more access to diagnosis and non-acute care is restricted, the greater the number of people who consequentially become acutely ill. These are patients for whom their treatment can’t be deferred without risk of serious harm or death.

When acute public hospital discharges increase at a higher rate than population growth, a tipping point is reached with hospitals, including their emergency departments, becoming overcrowded with bed access blocked for non-acute patients.

This has been the living reality for health professionals and patients since 2011. One consequence is to further delay or prevent access to essential non-acute treatment.

In other words, patients and health professionals are trapped in a politically created vicious circle.

The biggest driver of health demand and cost is external to the health system. These are called social determinants of health.

They are the circumstances in the environments in which people are born, grow up, live, learn, work and age.

These determinants include:

• income levels and support;
• housing, transportation and neighbourhoods;
• racism, discrimination and violence;
• education opportunities, including language and literacy skills;
• access to nutritious foods and physical activity opportunities;
• polluted air and water; and
• healthcare access.

Max Rashbrooke for good reason focusses on income support policies in his consideration of child poverty. Income (or to be blunter, poverty) is the social determinant with the greatest overall impact on health.

I have discussed the impact of social determinants of health in three previous posts of Otaihanga Second Opinion:

1. 11 November 2020: Income relevant to health systems.
2. 16 May 2021: Improving income support critical for improving health system.
3. 26 November 2024: General practice visits, emergency department presentations and social determinants.

The limits of balance sheet thinking

Health system balance sheets have some utility but are only a snapshot at a particular point in time, usually the end of a financial year. On their own they are not the foundation for a performance analysis.

Unfortunately Minister of Finance Nicola Willis, as part of the build up for her next Budget due in May, is an example of adhering to this balance sheet approach.

By replacing analysis with a snapshot the effect is to factor out everything that leads to what sits behind the prevailing current protracted health system crisis and its seriousness.

With a bit of help from the very wise Trinidadian public intellectual CLR James, I discussed the problems with this balance sheet thinking in my previous post (25 February): What do they know of balance sheets who only balance sheets know?

Unfortunately this balance sheet thinking factors out from analyses the impact of persistently high child poverty in Aotearoa.

To put it simply:

• social determinants of health are the biggest driver of health (particularly acute admissions) demand and cost;
• poverty is the most significant social determinant of health;
• as measured by child poverty data, New Zealand’s poverty rate is high by international standards as well as persistent or entrenched; and
• the more the child poverty rate is reduced, the better the health of New Zealanders, the less the demand on the health system, and the better the fiscal position of the health system.

Is this really so difficult to comprehend? It really is a no-brainer. For those who it is not a no-brainer, read Julia Gabel and Max Rashbrooke.

Until policy makers confront the reality that poverty drives both human suffering and system cost, the cycle will continue — and the price will keep being paid by those least able to afford it.