"Before using the term a second time, he told us, in all seriousness, that he did not like the term 'inmate', but preferred to refer to them as his 'play buddies', which he did."
Serco's operations director, Scott McNairn, said all staff and volunteers were expected to treat the prisoners as individuals, use names if they knew them and treat them with respect.
"These comments, as reported, are disappointing and do not meet the high standards we expect of our people. Staff will be reminded of their obligation to act professionally and respectfully at all times."
Corrections' northern regional commissioner, Jeanette Burns, said that when speaking to the public, prison staff were expected to "uphold standards of good taste and professional conduct".
"In this case Serco has reminded staff to act professionally and respectfully at all times. Corrections expects the highest standards of behaviour from its staff and any breach of the Code of Conduct is taken very seriously."
It comes as 3News revealed the private-prison operator had taken a tumble down prison rankings after revelations of a "fight club" operating inside Mt Eden Prison. The drop in rankings has cost Serco its $325,000 performance bonus, on top of previous penalties.