Extra beds will be added to a youth justice facility following a teenager's detention in police cells because there was nowhere else to put him.
The Budget included $5.4 million to address growing demand for youth justice beds, including the reopening of the remaining wing at Christchurch's Te Puna Wai o Tuhinapo residence, with an extra 10 beds.
The facility currently has space for 40 residents.
Late last year a judge accused the Government of breaching the rights of a 15-year-old who spent several days in solitary confinement in Christchurch police cells because there wasn't anywhere else to put him.
Te Puna Wai has had a troubled history. Last year the Herald revealed teenagers were unlawfully detained for weeks on end in its seclusion wing in 2014. Children's Commissioner Judge Andrew Becroft said there had since been significant improvements at the facility - but the reported breaches were serious and unlawful.
There are four youth justice facilities in New Zealand. Young people are sent there for a variety of reasons, including after arrest and before they attend Youth Court and being sentenced by the Youth Court for three to six months.
In response to the Herald story, Social Development Minister Anne Tolley said as part of an overhaul of care for young people - which has seen CYF replaced with a new Ministry for Vulnerable Children, Oranga Tamariki - the future of residences would be considered, including if "community-based options might be more appropriate, keeping safety in mind".
Tolley said that was still the case. The Budget includes $11.7m over two years to trial and evaluate community-based remand placements for young people.
"I agree with the Children's Commissioner that our residences have more work to do to improve outcomes for young people," Tolley said.
"The commissioner found in his recent State of Care report that staff work hard to meet the needs of young people, and that a number of improvements have been made to models of care, as well as increased training and supervision of staff and improved material conditions."
Budget 2017 also included an extra $500,000 for the Children's Commissioner, which will help fund up to 6.4 fulltime staff positions for 2017/18 and increase the monitoring role of youth justice residences.