Figures released last year suggest very few beneficiaries are taking drugs.

Of about 8000 beneficiaries sent for job drug tests, only 22 tested positive or refused to take the tests.

LISTEN: John Key speaks with Leighton Smith about the report

AUDIO: Listen to the full interview here

The numbers appear to contradict the Prime Minister, who earlier today told Leighton Smith drug dependency is a major contributor to New Zealand poverty.

John Key said a range of factors contribute to poverty, but he said every employer who tests people for drugs will have had prospective employees who failed the test.

"Some people are locked out of the labour markets because they're taking drugs and they're holding themselves back."

The Salvation Army argue the cost of housing is the major contributor to poverty in New Zealand, not drug dependency.

Social Policy Principal Advisor Campbell Roberts says the main problem is accommodation costs.

"They swallow up most of the income of a low income family, and the extent of those and the shortage of housing is by far the most important aspect that's putting people into poverty."

MORE: Report finds a third of NZ children are living in poverty

READ: Campaigners slam lack of action on child poverty 

Labour's spokesperson for children Jacinda Ardern is furious the Prime Minister has come out with such a statement at Christmas time, and is challenging him to produce the proof.

"That is patently untrue, totally irresponsible and totally demeaning to the hundreds of thousands of families who are struggling but doing the very best by their children."

She said the comments are morally wrong.

"I think one of the reasons that we continue to really struggle to make progress on this issue that I know New Zealanders care about is because we have from time to time people like John Key coming in and making false statements to try and detract people's empathy away from these kids."