The Australian government has a warning for Jacinda Ardern - deal directly with Papua New Guinea over the Manus Island detainees and face diplomatic consequences.
The warning comes as an Australian diplomatic cable is leaked to Fairfax. It reports asylum seekers "engaged in sexual activities with underage girls".
The leak's timing raises questions over whether the Australian government is retaliating after Ms Ardern repeatedly offered to take 150 refugees from the detention centre. The UNHCR has urged Australia to take up the offer.
The leaked report claims "some residents were renting rooms throughout Lorengau and luring underage girls between 10 and 17 years of age, with money, goods and food". According to the leak, police were unable to investigate the claims because they were not reported.
The report says the local health authority wrote to the police, concerned about an increase in HIV and sexually transmitted infections as a result of "increased interaction between the residents and the young girls".
"We were also told that some parents were implicated in the conduct of their children," the health authority said.
Around 600 asylum seekers remain on Manus Island, with more than 300 refusing to leave Australia's processing centre, saying they are afraid of violence from locals.
Despite the allegations contained in the leak, Ms Ardern's office says the resettlement offer is still on the table, "but it's clearly up to Australia to take up that offer".
It says the relationship with Australia is still strong, and if the offer was accepted, all refugees would go through "comprehensive screening and assessment processes that includes credibility and risk assessments and security checks.
"Refugees who do not meet New Zealand's relevant immigration policies, security and biometric checks and risk and health assessment are declined."
Ms Ardern also offered $3 million from within the aid budget to help provide services on Manus and Nauru.
Australia is unwilling to take up that either offer, saying it will encourage people smugglers.
"They market New Zealand the same way they market Australia … Why wouldn't people want to make that trek?" Australia's Immigration Minister Peter Dutton told Sky News on Thursday.
"At this point in time it's the wrong decision to send people to New Zealand, because you will start the boats."
New Zealand has never had asylum seekers arrive by boat, but Ms Ardern has previously acknowledged the situation is more complicated for Australia, with its large sea border.
When asked whether the New Zealand Government could bypass Australia and extend the resettlement offer directly to Papua New Guinea, Mr Dutton said a decision to do that could have consequences for New Zealand's relationship with Australia.
"Any sovereign state can enter into bilateral arrangements," Mr Dutton said.
"They would have to think about other equities within the respective relationships. They would have to think about their relationship with Australia and what impact it would have. They'd have to think that through, and we'd have to think that through."