The Government should be concerned about creating jobs for young people and getting them trained, not whether they are buying KFC, Labour leader Phil Goff says.

His comments follow the release of the National Party's youth welfare policy at its annual conference in Wellington over the weekend.

Prime Minister John Key announced the election policy and said his party would target the 13,500 young people aged 16 and 17-year-olds who are not in work.

Of those 1600 were on a benefit and Key said 90 per cent would end up on an adult benefit.

Under the scheme eftpos-style cards will be given to the young beneficiaries to pay for basic living costs. Their rent and electricity will be paid directly.

It will not be possible to buy cigarettes or alcohol with the card.

Technically those under 18 are not eligible for a benefit because they were considered the responsibly of their parents but 16 and 17-year-olds could receive a benefit if there were extenuating circumstances such a breakdown in the relationship with their parents or if they were parents themselves.

Key said they needed intensive case management to ensure they accessed drug and alcohol counselling, parenting courses and training programmes. They also needed their benefits applied to the "right things".

Goff said while he agreed with the need for case management, National was only tinkering around the edges with their plan.

"What they really need is a job and they need the skill training to get them the job."

People aged under 18 could not legally buy alcohol and cigarettes.

He said National's plan was more about politics than helping people.

"Of course you need case management, that's an important part of it, but making a decision about whether somebody should be buying Kentucky Fried Chicken on the $12 that you allow them at the end of the day seems a bit silly to me."

Key said the policy was not punishing the youngsters but "actually caring".

"What is more important than making sure that that young person pays their rent, pays their power and has enough money to provide food? Would you give your average 16 or 17-year-old somewhere between $200 and $400 a week and say 'good luck you're on your own, and by the way you're raising a child on your own'."

Wider welfare reform is expected to be part of National's election campaign.

Key also defended rejecting calls by its support partner, the ACT Party, to restore the youth minimum wage.

"Treasury's done a little bit of working looking at that and they say the results are inconclusive. When the youth wage was taken away, yes youth unemployment grows but they are not sure if that was because that was when the recession was occurring at its most ferocious point." Youth wages were not a panacea for youth unemployment, he said.

New Zealand First leader Winston Peters said the Government would be training youth for jobs in Australia because there were none here.

Labour and the Greens say National's policy fails to address the real problem - the lack of jobs in New Zealand.

Auckland Action Against Poverty spokesperson and former Green MP Sue Bradford said the use of private providers created an industry out of misery.

"Welfare has become big business for well-connected private and community providers in the United States and the United Kingdom, who are paid large fees for getting people off benefits.

"Often these companies are actually getting the unemployed into dodgy jobs or inferior training, while the provider creams off a very tasty fee."

Auckland Action Against Poverty was concerned the payment card would be expanded to adult beneficiaries, she said.

"John Key clearly has no idea what it is like out there."

Social Development Minister Paula Bennett said she didn't see the reform as punitive.

"Every indicator says that the best indicator you can have of a child's future success is the success of their mother," she said.

"Backing them getting into training or school or some sort of education I think is the best thing we can do for them."

Labour's employment spokeswoman, Jacinda Ardern, said the Government had not focused on the bigger picture of a lack of jobs for young people.

National's youth welfare policy - how it will work and what it will cost

Prime Minister John Key has announced a series of proposed changes aimed at teenagers out of work or training.

What's the issue?

Up to 13,500 young people aged 16 or 17 are not in education, training or work.

Of those 16 and 17 year olds not in training or work, about 1600 are on a benefit.

There are about 1000 people aged 18 who get the domestic purposes benefit.

An estimated nine out of 10 teenagers not training or in work go on to a benefit once they turn 18.

Teen parents spend on average seven out of 10 years on welfare once they are introduced to the system.

What changes?

The Government will change privacy laws so that it can track down the thousands of teenagers not in training or work.

The Government will pay private providers to work with teenagers not in training or work. Those most successful at getting results for the young people will be funded more.

Young people aged 16 or 17 on a benefit and 18-year-old DPB recipients will have essential costs such as rent and power paid

directly for them by the Government.

Young people aged 16 or 17 on a benefit and 18-year-old DPB recipients will have money for basic living costs like food and clothing loaded on to a payment card. It will not be possible to buy cigarettes or alcohol on the card. Only a smaller discretionary amount will be paid directly into bank accounts.

18-year-old DPB recipients will be paid childcare costs to allow them to go into

training or work as soon as possible.

What's the cost?

About an extra $20m to $25m per year at the outset, but savings are expected down the track.

When would it happen?

Legislation would be introduced early next

year and take effect some months after that.

Who else is affected?

The Government has indicated it is planning more announcements before the election for further reform in other parts of the welfare system. The overall direction of tighter controls on welfare payments and more involvement from the private sector is likely to feature again.