Prime Minister Jacinda Ardern says state care survivors did not want their cases "diluted" by the Royal Commission looking into abuse by the Church.
A father and son who say leading Catholic clergymen sexually abused them as schoolboys are accusing the Prime Minister of going back on her past assurances about including religions institutions in the inquiry.
So for instance, a child sent to St Patrick's by the state is on a different footing from one sent by their parents.
Ms Ardern told Morning Report the reason they made the distinction was because for thousands of children between the 1950s and late 1990s, the state was essentially a parent, therefore the state needed to take responsibility.
Watch Prime Minister Jacinda Ardern on Morning Report:
Cooper Legal, the leading law firm in this area, estimates half the children abused in the church did not get there via the state, meaning a lot of survivors fall outside the remit.
Ms Ardern said many of those institutions would still be covered by the inquiry.
"There is no doubt that there will be religious institutions who will be brought into the remit of this inquiry by virtue of the fact that children in state care may have in some form been sent there. This inquiry allows us to then look into both what occurred to that child via the state, the state's role in seeking to respond when that abuse was often raised and they didn't always respond to it but also what actually happened with those institutions too."
Ms Ardern said they were consulting on the terms of reference for the inquiry and said there was room for someone to have their say if they felt that was doing "an absolute disservice".
She said the reason the government was focussing on children in state care was because that was who called for the inquiry.
"The original impetus for this and what the Human Rights Commission pushed for, what those victims and survivors pushed for did come from the place of 'you are the state and you have to be responsible for us so please undertake this piece of work'."
"They were also worried that if we strayed too broadly that their case and their situation would be diluted and the state's responsibility would be diluted.
"For the children who came from state care they wanted us to focus on our responsibilities.
"We still have children in our care ... there are still those who say we haven't fixed anything of the past so we need to make sure that we are heavily focused on the role we do."