Barnaby Joyce saga: The trans-Tasman spat rolls on

The Australian Labor Party staffer who spoke to Labour's Chris Hipkins about New Zealand citizenship is a former New Zealand Labour Party staffer.

The conversation between the trans-Tasman politicians sparked two written Parliamentary questions written by Mr Hipkins - and a large headache for Labour.

Labour accepts the questions should never have been asked and insists Mr Hipkins didn't realise the ramifications - they could have destabilised the Australian government, which leads by a minor majority.

But Internal Affairs Minister Peter Dunne insists his department's investigations were instigated by Australian media, not Labour MP Chris Hipkins.

Mr Dunne calls the whole thing "utter nonsense".

On Tuesday night, Australia's Foreign Minister Julie Bishop said she'd find it "very hard to build trust" with a New Zealand Government, and Labour Party leader Jacinda Ardern responded saying she won't let "false claims" get in the way of a good relationship with Australia and said she'd happily take a phone call from Ms Bishop.

The ALP member who spoke to Mr Hipkins is Marcus Ganley, the chief of staff to senator Penny Wong. Mr Ganley previously advised Labour Prime Ministers Michael Cullen and Helen Clark, as well as Phil Goff when he was Leader of the Opposition.

A written statement from Ms Wong's office blames the Turnbull government for "recklessly" turning it into a "diplomatic incident".

"At no point did [Ganley] make any request to raise the issue of dual citizenship in Parliament, a fact confirmed today by Hipkins and the New Zealand Labour Leader," she wrote.

A political expert believes the incident has been blown out of proportion due to domestic political climates in both Australia and New Zealand.

Robert Patman from Otago University told Newshub the saga won't ultimately be detrimental to trans-Tasman relations.

"There are political problems in Australia at the moment and we are in the election season. There is an incentive for a rather minor incident to get blown out of proportion.

"I don't think this would be a serious impediment."

Mr Joyce said on Tuesday he's renounced his New Zealand citizenship so he can continue serving as deputy Australian Prime Minister.