Exploitation of Asian and Pacific Islanders who moved to New Zealand to work in agriculture, horticulture and viticulture sectors was also identified.
The department wrote that Government complied with the minimum standards for the elimination of trafficking, but it had not prosecuted any traffickers in seven years and had not identified a trafficking victim in nine years.
The report said New Zealand did not have a comprehensive anti-trafficking law and recommended that Government draft new legislation in order to properly ban and punish all forms of human trafficking.
The department urged New Zealand authorities to increase their efforts to investigate and prosecute sex and labour traffickers.
NZ First leader Winston Peters said the report confirmed that exploitation was rife in New Zealand.
"Those worst affected are usually immigrants brought here under false pretences, have their passports taken off them, and are forced to work for little or no pay in areas such as the food industry and the sex trade."