Prime Minister Jacinda Ardern is ruling out retaliation against Australia over Kiwis being deported who have little connection to New Zealand.
Ardern and Australian Prime Minister Scott Morrison held a bilateral meeting in Melbourne on Friday where she raised the fairness of Australia's immigration laws.
"I think New Zealanders look at this policy and just think that's not fair dinkum," Ardern said in a media stand-up after the meeting.
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New Zealand has pushed back since former Australian Prime Minister Tony Abbott changed the country's law in 2014 around the processes associated with visa cancellations on criminal grounds.
"[Morrison has] registered the concerns I've raised. He knows that I consider it to be corrosive to the relationship," Ardern said.
Despite the constant rebukes from Ardern, the Australians will not budge. Morrison wouldn't answer any questions on it in Melbourne.
When asked what she meant by "corrosive", Ardern said, "I just think we can't take our friendship for granted and if there is something that is causing concern for one side of friendship, it needs to be raised."
But the Prime Minister stopped short of calling for any retaliation against Australia. She said that hasn't been New Zealand's way.
"We've always taken a principled stance. I don't think two wrongs make a right."
Despite the diplomatic tension, Ardern appeared to be a popular figure in Australia.
"I admire Jacinda Ardern a lot and I've contemplated moving to New Zealand," one person at the NZ Australia Society of Government told Newshub.
Another said: "I'm a fan, and I think we should import her."
It comes after an image of Ardern hugging a Muslim woman was painted onto a street silo in Melbourne to symbolise acceptance and tolerance.
Ardern brushed off suggestions she was more popular than Morrison.
She spoke to a packed audience on Thursday night at Melbourne's Town Hall, and was asked for advice on how to foster better relationships with indigenous people.
But there may be something New Zealand can learn from Australia in that area. The country recognises the Aboriginal flag as an official flag of Australia - it flies on all Parliament and state Parliament buildings.
Tino rangatiratanga, the Maori independence flag, is only flown alongside the New Zealand flag on Waitangi Day. But in Australia, it hung behind Ardern at her speech.
When asked if New Zealand should recognise tino rangatiratanga as an official flag of New Zealand, Ardern said: "I saw that - I had no issue with that at all."
As to whether it should be flown at Parliament, she said: "It's not something that I've given any consideration to."