New research from the Ministry of Social Development shows the gap between rich and poor in New Zealand is at its widest ever.
The study found that income inequality narrowed between 2009 and 2010, but then widened last year.
The incomes of low- and middle-income earners either remained the same or fell, while those of the wealthiest people went up.
Between 2010 and 2011 median household incomes fell 3%, after rising 1% in the previous period.
The report says New Zealand is not out of place compared with other developed countries, because Australia, Japan and Canada have similar levels of income inequality.
Finance Minister Bill English says the recession has taken its toll.
But the Labour Party's social development spokesperson, Jacinda Ardern, says the Government could have done a lot more to help households by focusing on job creation and income.
She says Labour's bill to increase the minimum wage to $15 an hour would make a significant difference to those on low incomes.
Green Party co-leader Russel Norman says the report proves that average families are worse off under National and it is a damning assessment of the Government's economic management.
Meanwhile, the Child Poverty Action Group says the longer children stay in poverty, the harder it is to fix.
The latest ministry figures show hardship rates for children arising from circumstances such as loss of income increased from 15% in 2007 to 21% last year.
A spokesperson for the group, Susan St John, says the survey shows 60% of children in poverty are described as being in chronic poverty.
Ms St John says access to health services, good housing and better income should help at-risk children.
The Social Development Ministry's next income report is due in the middle of 2013.