The Refugee Council of New Zealand (RCNZ) has condemned the decision to take 150 refugees annually from Australia.
Spokesperson Gary Poole says: "This is certainly not the first time New Zealand has generously bailed out the Australians from the consequences of their disastrous policies of locking up asylum seekers in detention camps."
RCNZ is questioning whether the 150 refugees will displace some of the urgent high-protection cases that are already vying for places within the annual quota of 750.
"The recent UN report on the conditions at Manus Island have led to worldwide condemnation of the Australian practices. Their policy of mass detention has clearly failed and not a single people-smuggler or desperate asylum seeker has been deterred by it. New Zealand should learn from them what not to do and avoid following down the same slippery slope" says Poole.
Amnesty International echoes calls made by RCNZ saying they are "deeply concerned" that the deal does not address refugee protection in the region, and may actually undermine a regional approach.
"It is extremely disappointing to see the New Zealand Government's support for this policy, in its acceptance of this deal" said Amanda Brydon, Amnesty International's Government Relations Manager.
"Amnesty International also refutes the idea that this deal in any way contributes to a 'regional approach to refugees'. If Australia and New Zealand are genuinely committed to a regional approach then they need to engage meaningfully with countries like Malaysia, Thailand and Indonesia, not just each other."
Australian Prime Minister Julia Gillard has insisted that New Zealand's decision to take 150 refugees annually from Australia will not send any message of encouragement to boat people.
"It will fit the 'no advantage test' because we don't any message sent anywhere around the world that by transitting to Australia you get some form of advantage, whether it is resettlement in Australia or resettlement in New Zealand," Ms Gillard said after talks with Prime Minister John Key in Queenstown.
The 150 will be asylum seekers who have been approved as refugees in one of Australia's recently re-opened offshore processing centres, in the island state of Nauru or Manus in Papua New Guinea.
Ms Gillard said that under the 'no advantage' system, no one procesessed in Nauru or Manus and deemed a genuine refugee would not be resettled any earlier in Australia or New Zealand until they had spent the same amount of time that they would have had they not moved from their previous base.
"But you've paid a people smuggler and you've risked your life."
Mr Key justified the new arrangement by indicating it was New Zealand's way of paying its way for use of Australia's more sophisticated intelligence gathering on illegal migration which is shared with New Zealand.
"We get a huge amount of support from Australia. It's less resources that we have to put in."
Australia had been extremely helpful to New Zealand over the past four or five years.
"There are boats that we can point to that were on their way to New Zealand where Australia has effectively taken those people.
"I don't think it is a theoretical issue that a boat could turn up in New Zealand any more than it was theoretical that once could turn up in Canada."
Mr Key also indicated that there could be a quid pro quo down the line if New Zealand had a mass arrival of boat people.
He said it could be possible for Australia to process them in one of its offshore centres but that would require a law change.
"That is an ongoing area of discussion."
He said the people who were approved as refugees in Australia had to prove they were genuine refugees.
The Labour Party is questioning whether the decision means the government has had a change of heart of its proposed 'mass detention' law.
"Just last year the Prime Minister John Key and his Immigration Minister, Nathan Guy, were describing asylum seekers who arrived by boat as 'queue jumpers' and 'illegal immigrants'," says Immigration spokesperson, Darien Fenton.
"Now, however, it seems Mr Key is prepared to take a number of the very same people - from recently reopened Australian detention centres on Papua New Guinea's Manus Island and Nauru - that he has previously disparaged.
"Whether or not that means the government realises it doesn't have the support to pass its embarrassing and much-criticised law and withdraws it remains to be seen.
"What is certain is that New Zealand should not go down the flawed path of mandatory detention that has caused so much grief in Australia.
"The people we take will require considerable support beyond the point of release into the community. That means the government must also be prepared to back the cash-strapped New Zealand refugee organisations tasked with helping settle them."
New Zealand last took refugees in a similar manner in from The Tampa - 131 for resettlement in New Zealand in 2001.
The issue of arrivals of asylum seeker by boat has plagued the Labor Government ever since former Prime Minister Kevin Rudd ditched offshore processing in Nauru and Manus Island in 2007.
The policy had been introduced by John Howard's Government in 2001 and had virtually stopped boat arrivals.
After a large-scale resumption in boat arrivals and many instances of mass drownings in sub-standard boats, the Gillard Governemnt has revisited the so-called Pacific Solution and re-opened the centres in Nauru and Manus.