The Child Poverty Action Group says the welfare system is based on outdated ideas about relationships, with single parents being penalised for starting a new relationship.

Photo: RNZ / Kim Baker Wilson

In a report released today the group said there were major inconsistencies in the system, with people classified as a couple being paid less-than two individuals who share accommodation and costs.

The group's economics spokesperson Susan St John said the tax system was based on individuals and the welfare system should be too, instead of treating couples punitively.

"What we do in the welfare system is actually damaging to mothers and to their children particularly, and it's time for a complete rethink of the issues underpinning out welfare system."

She said mothers on the sole parent benefit may be too afraid to start a new relationship lest they lose their income.