Labour says private prison company Serco must be booted out after an alleged rape in a jail.
Police, The Department of Corrections and Corrections Minister Peseta Sam Lotu-Iiga were all investigating after the prisoner, previously segregated, was moved into the "mainstream" jail population, then allegedly beaten up and sexually assaulted.
Labour's acting Corrections spokeswoman Jacinda Ardern said the incident was "clear evidence" Serco was not fit to run New Zealand's prisons.
"After the chaos and violence we saw at Mt Eden Prison, we are now seeing Serco isn't fit to run Wiri prison either.
"It's there in black and white in Serco's contract that they have to run proper segregation policies at Wiri to keep at-risk prisoners safe. They clearly aren't living up to that."
Ms Ardern said the Government was "being soft" on Serco.
"They've had second chance after second chance so the Minister won't have to face up to reality," Ms Ardern added.
"Privatising the prisons has been a disaster. Everyone can see it and it's time National admitted it.
A family member of the inmate told the Weekend Herald he rang on Wednesday saying: "I'm scared. They're putting me in mainstream and they're not giving me a reason."
Until then, the inmate had served almost half his sentence in segregation, the Weekend Herald reported.
The Herald earlier reported Serco was forgiven $620,000 of financial penalties after being issued performance notices by the Corrections Department since it took over private management of the Mt Eden in August 2011.
Scandal-ridden Mt Eden earned notoriety and landed Serco in trouble this year after videos of a prison "fight club: circulated online.
• The inmate said to have suffered the attacks has since been revealed to be transgender and receiving hormone replacement therapy. The pronoun "he" reflects the understanding at the time the story was published.