Foreign Affairs Minister Murray McCully says sending asylum-seekers who arrive in New Zealand illegally to Australian-run processing camps would not damage the country's reputation internationally.
The Government is considering using Australian-run detention centres, some of which are in Nauru and Papua New Guinea, as part of its plan to anticipate any mass arrival of asylum-seekers to New Zealand.
Prime Minister John Key says the threat of a boat carrying hundreds of people reaching the country is a very real possibility, and sending people to centres in Australia, Nauru or Papua New Guinea has been discussed with the Australian government.
At the weekend, New Zealand agreed to take 150 asylum-seekers from Australian detention centres following a meeting between Mr Key and Australian Prime Minister Julia Gillard.
The United Nations says conditions in the detention centres are inhumane.
Mr McCully said on Tuesday he has not inspected the conditions, but disputes the suggestion that New Zealand's reputation would suffer internationally if it uses the camps.
"I think the dangers would lie in New Zealand standing aside from finding a regional solution for a regional problem.
"The long-standing position that I've adopted (and) the Prime Minister's adopted is that this is a regional problem and that we should try and take a constructive approach."
The Labour and New Zealand First parties say Mr Key is taking up the threat of boat people arriving in New Zealand waters to justify deals being done with Australia.
Labour said on Tuesday it wants to see evidence of the Prime Minister's claim that Australia has been willing to shepherd boats carrying asylum-seekers into New Zealand waters.
John Key says there have been situations where asylum-seekers have told Australian authorities they wanted to carry on to New Zealand and consideration was given to helping them across the Tasman.
Mr Key said the possibility of Australia shepherding boats came from intelligence sources, not from Australian Prime Minister Julia Gillard.
Labour leader David Shearer on Tuesday called for Mr Key to back up his claims.
"Where is this intelligence? This is an incredible claim - that Australia was going to shepherd refugees across to New Zealand unless we took 150 of their refugees - that's extraordinary. Front up with the evidence - we want to see it."
New Zealand First leader Winston Peters said the possibility of a mass arrival has been bandied about for years.
Senator's warning for NZ
An Australian Greens Senator says New Zealand is following her country's lead in discriminating against asylum-seekers.
Sarah Hanson-Young said the conditions in the detention centres are sub-standard - a finding supported by the UN High Commissioner for Refugees and human rights group Amnesty International.
Ms Hanson-Young said the centres are like prisons and New Zealand will look like it does not care about asylum-seekers if it sends them there.
The Refugee Action Coalition in New Zealand said it can't believe that any politician would willingly associate themselves with the detention centres. Spokesperson Ian Rintoul questioned why John Key would want to align his government with them.