This paper describes a novel tool designed to measure Potentially Avoidable (PAH) and Ambulatory Care Sensitive (ACSH) Hospitalisations in New Zealand children. The study examined whether the PAH and ACSH can clarify if policies or programmes addressing the underlying determinants of health (e.g. poor housing, exposure to cigarette smoke, child poverty) reduce hospitalisations in this age group. Data consisted of all acute and semi acute (<1 week of referral) hospitalisations in New Zealand children aged 29 days–14 years during 2000–2009, as well as all hospitalisations for selected dental conditions. The PAH and ACSH determined category membership; explanatory variables included age, gender, ethnicity and NZ Deprivation index decile. During 2005–2009, 47.4% of all acute paediatric hospitalisations were categorised as PAH, 34.3% as ACSH and 9.7% as non-avoidable. A further 42.9% were grouped as non-classified conditions. Dental conditions and gastroenteritis were the leading causes of both PAH and ACSH. PAH and ACSH were highest in infants and one-year-olds, while non-avoidable hospitalisations were more evenly distributed throughout childhood. PAH and ACSH were higher for those from deprived areas and for Pacific and Māori children. Socioeconomic differences for non-avoidable hospitalisations were less marked, with rates being lowest in Māori and Asian children