NZ First leader Winston Peters says a move to set up a new ethnicity-based political party for Asian and Indian immigrants is a "an extraordinary demand" which will harm New Zealand.

The People's Party has been set up and acting leader Rohan Nauhria told RNZ it would campaign on issues such as crime and was aiming to get into Parliament by focusing on the Indian and other Asian communities.

The announcement of the People's Party got a frosty reception from NZ First leader Winston Peters who said race-based parties were bad news.

"No country is going to progress if we have political parties spending time accentuating their differences. For people to come into New Zealand and say we're going to start an ethnic-based party is an extraordinary demand to make."


Prime Minister John Key said he was not surprised the party had emerged given the recent focus on migration.

"It's not just Winston Peters with an anti-migrant message, it's also been people like Labour. So you're always going to get people wanting to make sure their voice is heard the other way."

Key doubted it would get into Parliament, based on the history of similar one-issue parties and its lack of a well-known leader.

He said it was important for ethnic communities to be represented, but they were better served by the major parties selecting candidates from those communities rather than forming their own party. "I think that's a far more effective and likely to be successful."

Peters said ethnic groups were already well represented in Parliament and there was no need for a separate party.

The party launch coincides with Key writing an open letter to ethnic media outlets in a bid to reassure ethnic communities that the Government was focused on crime after concerns about rising burglaries.

Labour leader Andrew Little rejected Key's claim Labour's immigration stance was to blame, saying the People's Party had made it clear its main concern was crime - not Labour.

"And we know that because crime, particularly burglaries, robberies and assaults, have been increasing and that's because of the way this Government has failed to manage Police resources."

Labour does not currently have any Asian or Indian MPs in its caucus, but Little said it had a strong ethnic sector group from which to draw candidates in future elections.

The People's Party plans to stand in the Mt Roskill by-election if Phil Goff is elected Mayor in the Auckland Council elections.

National's likely candidate in the byelection will be Indian-born Parmjeet Parmar, who migrated to New Zealand in 1995.

Labour has already selected Michael Wood, who is well known in the electorate as a local board member.

The byelection could be a test run for an electorate deal between Labour and the Greens.

The two parties have agreed to cooperate in some electorates to maximise the chances of winning - which could see the Green Party opt not to stand candidates in marginal seats.

Little said that had not yet been discussed for Mt Roskill but was a possibility.

Although Labour has held the seat for decades, National got more of the party vote in 2014.