The Children's Minister plans to direct $27 million of budgeted ministry funding towards shutting down the practice of remanding children in police cells overnight.
Oranga Tamariki, formerly named Ministry for Vulnerable Children, came under public scrutiny last year over the practice of remanding young people in police cells overnight.
Children's minister Tracey Martin, from New Zealand First, said $15.7 million of the funds would go towards improved care placements.
She said the money would be used to improve the availability of care placements, trialling ways to transition young people from care to independence and developing a tool to help with youth justice decision making.
"What that means is it's setting up houses inside communities where when we have to uplift a young person in crisis or when the youth justice service actually directs them to be held in remand, we can place them into one of these care homes," she said.
"As opposed to what it has been in the past which would be placing them in police cells."
She said over the last seven to eight months the ministry had seen the number of young people held in police cells drop substantially.
Children's Commissioner Andrew Becroft applauded the move, saying he had long advocated against the practice.
"It's a use of an adult facility, and solitary confinement. If it's prolonged it can cause serious psychological risks, there's separation from families, separation from support, it's wholly unacceptable," he said.
He said it was something the United Nations had criticized New Zealand for, and could increase the risk of suicide.
Opposition party National's spokesperson for children and social investment Paula Bennett said the extra funding was simply picking up where National left off, as the money had been allocated in last year's budget.
"I'm glad to see she's picking up where we left off but she shouldn't pretend these are new initiatives.
"This money is all contingency funding that we set aside in last year's Budget."
She said the money was set aside to do so much more than what the Minster had announced today.
However, Ms Martin said she had always been committed to continuing down the path previous minister Anne Tolley had set.
She said her understanding from Oranga Tamariki was that the funding was not drawn down, because the government had not had a plan on how to spend it.