Twenty-five agencies including CYF had been involved with the family because of concerns about neglect. The girl was sexually abused while in CYF care and was returned to her mother in 2008.
"With the benefit of hindsight of course we wish we had made a different decision in regard to returning this little girl home,'' Ms MacKenzie said.
She said the mother had gone to considerable lengths to mislead agencies that she had her daughter's best interests at heart and the case highlighted the need for agencies to work together and for changes in legislation to protect children.
Social Development Minister Paula Bennett said the Government had learned lessons and was hopeful the recommendations in a ministerial report by former Ombudsman Mel Smith would improve the country's child abuse record.
But she accepted social welfare agencies had failed the child.
"Yes they did, but I think we have to step back and say, look we were dealing with an exceptionally deviant and manipulative woman in the mother and what she did,'' she told Radio New Zealand.
"Unfortunately you have some pretty sick and sadistic people that see beating their children as the only way they can do it and I can't change that overnight but we will actually ask the hard questions, we'll make the changes we need ... and I am hopeful that we can make a big difference.''
Recommendations in the report include reviewing information-sharing between government and non-government agencies and legislation on mandatory child abuse reporting, researching issues around the care of vulnerable children by extended family and lifting the level of CYF social work skills and practice.
"We've already taken some of those learnings _ we've announced another 149 social workers in schools and another 96 frontline social workers. We're certainly working towards most of the recommendations,'' Ms Bennett said.
The Government's Green Paper for Vulnerable Children, which is open to submissions, could have a great impact, she added.
"Please read it, please put in submissions. It has got the potential to be the biggest catalyst for change for how we work with vulnerable children and child abuse in this country.
"We need all New Zealanders involved in that. A minister and an agency alone can't do it, it's going to take changes in New Zealand.''
Child Matters chief executive Anthea Simcock agreed with many of the recommendations but said most were nothing new, and their implementation would not be a silver bullet.
"This report focuses particularly on the professionals and the things that could have been done to end the abuse. It won't stop people abusing their children.''
Children's Commissioner Dr Russell Wills said if the changes the report recommended were implemented there was a good chance of reducing serious abuse.
