Information on those young people could be shared between the Ministries of Education and Social Development.
"For the first time, we will be able to find out who all these disengaged 16 and 17-year-olds are; what circumstances they are in; what problems they have had at school and what their risk of long-term welfare dependence is."
Mr Key said in his keynote address to the National Party's 75th conference, in Wellington during the weekend, that for the first time a considerable part of the Government's funding of transition services would depend on something actually changing. That could include goals such as the young person successfully completing a training programme, or not being on a benefit at age 18.
"Put simply, we are going to make it worth someone's while to get these young people back on track."
There were three parts to the Government's policy, to start next year; to end welfare dependency for young people.
Next year there would be 7500 places available under the Government's Youth Guarantee policy, which provided free study towards school-level qualifications in places such as polytechnics and wanaga. In two years, trade academies would be able to provide 4500 places in free, work-focused trades and technology training.
The Government would introduce a more managed system of payments, with the young person's support provider, or Ministry of Social Development in some cases, paying bills on their behalf and helping them manage within their budget.
It was envisaged essential costs, such as power and rent, would be paid directly on the young person's behalf. Money for basic living costs such as food and groceries would be loaded on to a payment card that could only be used to buy certain types of goods and could not be used to buy things such as alcohol or cigarettes. A limited amount of money would be available for the young person to spend at their own discretion.
Young people receiving those payments would have clear obligations such as attending budgeting or parenting programmes.
Mr Key said that meant everybody, including teenaged parents.
"We have carefully considered the interests of the children here. And we absolutely believe that a child's interests are best-served if their parent continues with her own education and if the child is in good quality child care."
The cost of the policy could be up to $25 million a year at the outset, he said.
The costs would be consolidated once more details of the package were worked through.
However, if the number of young people going on a benefit at age 18 could be reduced, the Government could be saved future welfare, justice and health payments.
Also, the social and economic outcomes for those young people would be improved over the course of their lives, Mr Key said.
The Labour spokeswoman for youth affairs, Jacinda Ardern, said the welfare announcement failed to address the problem of job creation.
"Our young people don't need welfare reform, they need jobs."
Rather than use his keynote speech to outline his economic plan for New Zealand, Mr Key had a third attempt to address youth employment and for the third time ignored the primary problem of there not being enough jobs out there, she said.
National's suggested "punitive changes" to benefit structures would affect about 1500 16- to 17-year-olds but it was being treated as a silver bullet.
"How will food stamps move young people into education or work? It is the 58,000 young people who are not in employment, education or training that need the Government's attention," Ms Ardern said.
