Social Development Minister Anne Tolley has outlined a major overhaul of Child, Youth and Family (CYF), which she says will involve much better tracking of children in state care and more contracting out to other organisations.
She has released an interim report by an expert panel led by former Commerce Commission chair Paula Rebstock, which will be used in the review of the system.
Mrs Tolley said the outcomes for children in state care were appalling, with some young children going through seven or eight placements before a permanent home was found.
"It's pretty grim reading when 90 percent of the children who have been in state care end up on a benefit. About 25 percent of them are on a benefit with a child. Almost 80 percent don't have NCEA Level 2. More than 30 percent have a youth justice referral by age 18, and almost 20 percent have a custodial sentence," she said.
"The outcomes for children that have been through the state care system are dreadful."
Mrs Tolley said the new structure would be child-centred, with a shift away from processes and administration, and the agency would take an investment approach, using evidence-based targeted intervention.
She said there would also be more contracting out to outside organisations.
"We'll be contracting out to NGOs, as we are now, but with results. We'll be wanting them to work with these families to make sure the children are attending school and are succeeding in school, that they're getting their health checks."
However, she said no private company would be given ultimate responsibility for at-risk children.
Opposition parties have raised fears that the government plans to privatise state care but Mrs Tolley rejected that.
"Lots of people want to get contracts with the government. That doesn't mean that the government's even entertaining them.
"I've been very clear that I'm not talking about putting any part of CYF's statutory responsibilities over to a private company, whether it's Serco or anyone else."
Mrs Tolley said the changes would require extra funding, and the panel would present her with cost estimates by the end of the year.
She said the finer details of the restructuring would be worked through with employees and unions once the panel's final report had been taken through Cabinet.
"I can't see that we're going to need less staff. We might need some different mixes of staff, but we've still got those kids and their families out there, and we're still going to need the job done."
Children's Commissioner Russell Wills said more government investment in CYF could not come soon enough, and the reforms set out in the interim report were promising.
The Labour Party also said the interim report was a step in the right direction but said it had major concerns about the so-called investment approach to state care.
Labour's spokesperson for children, Jacinda Ardern, said there were still big question marks over what that would mean in practice.
"The report talks about, for instance, creating incentives to get the right outcomes for kids. What better incentive is there than the wellbeing of children? If that is code for adding profit motive and social bonds, we would have major concerns about that."
New Zealand First, meanwhile, questioned why it had taken so long for the government to start taking the issue seriously.
Its social welfare spokesperson, Darroch Ball, said there were no surprises in the report.
"Why has it taken seven years to figure out that kids in care end up on the benefit? ... This report, this kind of overhaul, should have happened years ago."
He also questioned how the government would fund the contracting-out of more services.
Child Poverty Action Group social security spokesperson Mike O'Brien said NGOs were already poorly resourced.
"There's an acknowledgement in the report about the complexities of need, and there's no evidence that I know of that says there's a whole pool of social workers waiting to pick up that complexity. We're simply reshuffling the pool that we've got."
He said the report missed any real attempt to address what drove children into care.
The Dingwall Trust, which supports youth who cannot live at home, said it was glad the government was finally taking a wider look at flaws in CYF's system.
But it said the interim report released today had very little new information.