Political parties' interpretations of the Salvation Army's State of the Nation report wildly differ.
National, which governed for nine of the 10 years the report covers, said the report "confirms a large number of economic and social improvements created by National's stewardship".
The party's reaction came despite the Salvation Army saying the report showed "frightening" levels of poverty.
Meanwhile, Prime Minister Jacinda Ardern said it underlined "real-life impacts of a decade of management that left too many people behind".
"My government is not prepared to tolerate this, and has already made substantial changes that will give families the dignity they deserve," Ardern said.
The 67-page report, titled Kei a Tātou - It is us, showed pay packets for families on the breadline were being swallowed by rising living costs.
More and more families now call on the 'Sallies' for food parcels – up 12 per cent after five years of static demand, the report said.
Green Party welfare spokeswoman Jan Logie said the report evidenced "nine years of neglect" by National.
"Thousands of New Zealanders are living hand-to-mouth, in the most desperate of circumstances," she said.
Pressure group Auckland Action Against Poverty was also scathing of previous government policy.
Spokesman Ricardo Menendez March said GDP growth had not translated into income growth.
He pointed to benefits for sole parents rising six per cent between 2013 and 2017, while housing prices skyrocketed.
But National's social development spokeswoman Louise Upston said the report released Wednesday showed a number of "key social indicators" – including jobs, incomes, housing and benefits – had seen positive improvement.
"During our term in office we raised the minimum wage from $12 an hour in 2008 to $15.75 in 2016/17. That's an increase of 31 per cent – more than twice the rate of inflation," she said.
"We increased benefits for the first time in 40 years and, since 2011, reduced the number of children living in benefit-dependent households by 60,000.
"Perhaps most notably though, since 2010 we reduced the number of children living in material hardship by 135,000."
National's social policy reforms had created "real improvements", from a 31 per cent reduction in youth crime to improved NCEA level 2 pass rates, Upston said.
Although the number of working age people receiving benefits has dropped from 339,000 in 2012 to below 290,000 in 2017, outcomes for children of families who have come off benefits remain untracked, the report said.
Salvation Army social policy director Lieutenant Colonel Ian Hutson pointed to growing social exclusion for the impoverished and "alarmingly high" suicide rates as problems which should "galvanise" New Zealanders as a society into action.
"There was no discernible change in child poverty rates, and youth unemployment remained at around 20 per cent," the report said.
Despite slowly closing gaps, "tens of thousands" of underprivileged youth face academic under-achievement and limited opportunity.
That put them at high risk of "anti-social and personally destructive behaviours", the report said.
"It suggests that as a society we are overlooking the needs and potential of our young."
Jacinda Ardern said her government had "moved quickly" to introduce its Families Package, which would increase incomes for about 384,000 families by an average of $75 by 2021.
Menendez March called on the Government to provide more state homes, increase taxes for the wealthy, and ensure liveable incomes. the wealthy, ending all benefit sanctions, and ensure liveable incomes.