The Prime Minister says fewer New Zealanders are moving to Australia because it is more affordable to live here.
The Government has been warned by the Treasury the annual net inflow of migrants - which is now forecast to peak at 38,000 in the second half of this year - will put further pressure on housing demands.
Two years ago 40,000 New Zealanders moved overseas, mainly to Australia - and that number has fallen to about 10,000 this year.
Mr Key said that was because the cost of living and housing is cheaper here and people want a good place to live and raise a family and a job to support their family.
He says that was why the Government had been focussed on improving the economy.
Labour said no controls on immigration could be disastrous for housing, particularly in Auckland.
The Australian Government this week announced a raft of cost-cutting measures, inclduing a decision to deny unemployment benefits to citizens aged under 25 years.
Parliament passed legislation under urgency enacting some of the main parts of Thursday's budget.
The first bill included the provisions to extend paid parental leave, increase the amount of the parental tax credit and the number of weeks families can receive it.
The other removed the duty and tariff from building materials, aimed at reducing the cost of new home construction.