I do not understand what the problem with lifestyle beneficiaries is.
I will define "lifestyle beneficiary" for the purposes of this post as a person who, for whatever reason, chooses not to seek paid employment in such a way as to cover all of his or her expenses, who does not have any personal relationships such as their expenses are paid for by an individual (or a group of individuals) and who therefore relies on the state for an income. The term obviously usually has negative connotations, but that's what I'm going to talk about. I'm not intending to import them as subtext to this post.
I don't know if there are any good stats to suggest what proportion of beneficiaries are lifestyle beneficiaries. I'd expect it to be small, mostly because the stats I have seen seem to suggest that most people move off the DPB and the dole fairly quickly, and invalid's benefit is of course a different matter.
Anyway, I really don't see the problem.
The government of New Zealand used to explicitly follow policy aimed at full employment. This was, up until the 1980s, a fairly bipartisan thing (as I understand it), and is presumably one of the things behind Think Big and all the other grand infrastructure works of the 60s and 70s. In the 1980s, things changed, and there's been for the last 30 years a fairly bipartisan approach of laisse fair economics.
Talk all you want about whether that was a good thing or not; I think it is genuinely up for debate, at least in some areas.
One of the inexonerable consequences of moving away from state intervention to create and sustain full employment into a situation where you let the market rise and fall as it wishes is that you will end up with people who are structurally un- or under-employed. This isn't, as far as I am concerned, up for debate (and if you are a right-wing economist, you'll probably argue that it isn't a bad thing. That's genuinely up for debate too).
The structural unemployment comes from the fact that sometimes the market will have a few less jobs than people, and sometimes the market will provide a lot less jobs than people. But there are incentives to always having fewer jobs than people: it keeps wages lower, it makes the market more flexible, and blah blah blah classical economics 101.
[Someday I will talk about why I think this is so utterly shit, but today is not that day. Today is about pragmatism.]
So you now have some people who, try as they might, are not going to get or keep a job that pays their expenses. This is a problem: having homeless people dying on the streets is pretty unpleasant plus it turns out that they are people too and not some alien species who don't warrant basic human decency or care!
As a sop to these radical notions of "not being total douches" and "caring about your fellow humankind", the state provides a minimum level of income at a level designed to prevent your unemployed people from dying unpleasantly on the streets. This is not generally a level which will allow them to go on extended trips to Europe, and maybe not even to the other end of whatever island they're on, but they're probably fed and housed and reasonably comfortable. Success!
But! It turns out that not having employment makes most people feel demoralised and shit, which gets compounded by unemployed people living on state funds being told constantly that they're bludging scum who don't deserve nice things. And if they're women: that they should keep their legs closed and not have kids they couldn't afford! Because everyone who doesn't plan and budget for their relationship breaking down has failed as a human being!
Nevertheless, some people who are structurally long-term unemployed manage to find other things to do with their time (whatever those things are), such as they're no longer that motivated to spend 40 hours a week in an environment they probably don't like that much all for a (few? lot?) more dollars in their pocket.
What the fuck is wrong with that?
If you're accepting of the basic bipartisan premise of NZ economic management: that there will be unemployed people; and especially if you're defending that policy on the grounds that it provides market incentives that you agree with --- if you're doing that, where's your problem with people who take themselves out of the market entirely, thus leaving jobs for people who DO want them? And who do so for what they get on the dole, which is effectively 4/5ths of fuck all?
Why do you want some people to be unhappy all the time?