The government should do significantly more to investigate and prosecute people smugglers, a US State Department report recommends.
The in Persons Report, which ranks countries' efforts to combat human trafficking, said New Zealand met the minimum standard, but could do more in some areas.
It found New Zealand was a destination country for trafficked people, some of whom were exploited by employers and recruitment companies and forced into labour.
"The government expanded compliance checks to ensure work contracts matched those used to apply for work visas and met legal standards," the report said.
"The government, however, did not consistently identify trafficking victims in vulnerable sectors and continued to treat possible forced labour cases as labour violations."
The report said some victims of trafficking into New Zealand may have slipped under the radar.
It also said a small number of Pacific Island and Maori children were at risk of sex trafficking and street prostitution.
Despite continuing to cooperate with foreign governments to identify child sex tourists coming into the country, and to prioritise the prevention of child sex tourism abroad by New Zealand residents, the report said "these efforts did not result in any investigations or prosecutions".
E Tu union official Dennis Maga agreed the government could be doing more and should put more resources into stamping out exploitation.
He said more strategies were needed to address the problem.
"It's going to be a combination of legislation, heavier penalties, and of course additional resources from the National government."
Yesterday it emerged that security forces in southern India had arrested two men reported to have been trying to send more than 100 refugees here.
Indian media reports said the men were promising jobs in New Zealand to Sri Lankan Tamils living in refugee camps.
Immigration Minister Michael Woodhouse said New Zealand was increasingly being marketed by people smugglers as an attractive destination.
"I think we're being marketed as a more attractive place because of the efforts Australia has gone to to make it very clear to those contemplating coming that they will not be resettled."
He said no boat ferrying large numbers of refugees had ever landed in New Zealand, but should one do so, it would be detained.
"A judge can grant a warrant of detention for a mass arrival of 30 or more asylum seekers," he said.
"The law also provides (that) anyone who is granted asylum won't be able to have family members join them, and there are other measures that make mass arrival the least attractive proposition available as it's hideously risky and highly likely to result in death."
New Zealand First leader Winston Peters said the country was becoming known as a "soft touch" and the best solution would be to increase the staffing of the Labour Inspectorate.
"It's our reputation that's at stake and you would expect politicians who spend so much time talking about how much they care about ordinary people to do something about it and stop ignoring the exploitation of so many people."