Liberal Leader Jon Gerrard says the system is focused too much on apprehending kids and not enough on helping families before their children are taken away.
Gerrard has released a 60-page report that calls for higher housing allowances for welfare recipients.
The report also calls for better diagnosis and treatment for kids with Asperger's syndrome, fetal alcohol spectrum disorder and other conditions.
Gerrard says families should be given more government-funded support to keep their kids in the home.
He says that would cost more money up-front, but save much of the money currently spent on children who have been apprehended.