They had slept in tents around Gisborne, which has one of the most acute housing shortages in the country.
Gisborne nurse Alana Wells was shocked when she found the three-year-old was completely unharmed.
Axle wandered off with the neighbour's dog and spent Tuesday night sleeping in a small gully.
"When the search teams finished at midnight the night before and I hadn't had a call - it's probably fair to say it was a low period."
Peter Hughes, who found Axle, says the boy is a "tough nut" for surviving in the bush all night.
Axle went missing on Tuesday and spent the night sleeping in a small gully.
"He was pretty happy to see his mum and dad and pretty happy to get a feed."
Axel was found with a few scratches after a "big adventure" took him far away from his family home.
The social housing waiting list is the second-highest per capita in the country.