Immigration rules should be changed so that employers, such as ethnic restaurants, hire New Zealanders instead of recruiting from overseas, Labour leader Andrew Little says.
Mr Little said large intakes of semi-skilled migrants were putting pressure on jobs and wages, especially in Auckland.
The hospitality industry was a good example of where migrant workers could be affecting wages, he said.
"We have big ethnic populations, certainly Indians, certainly Chinese, and I would have thought that we can now source chefs locally, rather than rely on immigration to get them."
Prime Minister John Key said he was confused by Mr Little's comments.
"I dunno where he's coming up with stuff. One minute they said they didn't want people with Chinese-sounding names buying a house, now they don't want people with Chinese-sounding names making chicken chop suey.
"Honestly, we're a country based on migration."
Mr Key said migration had been helping to drive the economy.
Mr Little said he was not playing the race card on immigration, but New Zealand was going through some growing pains and it was right to turn the tap down on immigration to moderate the flow.
"Then when things are sorted out, then let's open the gates again."
Labour's political ally, the Green Party, did not agree.
Co-leader James Shaw said record high immigration was partially driving the Auckland house crisis. But capping immigration numbers would not help the economy, he said.
"Those things aren't related to each other. If you've got parts of the economy that are under-performing, and then you take one part of the economy that is performing and you turn that down, then the net effect is that the whole economy is worse off."