New Zealand is not prepared to extend the number of refugees it accepts and needs to address the increasing risk of people-smuggling boats hitting our shores, says Prime Minister John Key.

He has been discussing with new Australian Prime Minister Julia Gillard the possibility of being involved in a "regional processing centre" in East Timor for dealing with asylum seekers or "boat people". Ms Gillard has spoken to East Timor President Jose Ramos-Horta about it.

Ms Gillard said today the Australian government intended to come down hard on people-smugglers while showing some compassion for those legitimately seeking refuge.

Australia is commonly targeted by people-smugglers who take money from those seeking asylum and pack them on to boats, promising good prospects. How harshly to deal with them has for a long time been a political hot potato in that country.

Mr Key said today the problem was increasingly relevant for New Zealand.

"The first thing I would say is that New Zealand is not immune to that issue. I have been warning New Zealanders for quite some time that these boats are becoming larger and therefore more capable of coming to New Zealand."

He said he told Ms Gillard New Zealand wasn't interested in increasing its refugee take of 750 a year under the United Nations High Commissioner for Refugees (UNHCR) system, nor was it interested in accepting a reduction in the quality of the refugees it accepts.

"But we are prepared to sit down with the Australians and have a discussion with them to see whether there is a solution. But the solution from our perspective has to ensure that it acts as a strong deterrent for those who are engaging in people smuggling and doesn't act as some sort of magnet to increase the number of boats that are coming to Australia - and maybe one day to New Zealand."

Green Party immigration spokesman Keith Locke told NZPA he didn't think the threat of boats coming here was a realistic, considering the long and rough passage they would have to encounter.

He said a processing facility which had been set up on Nauru several years ago under the John Howard government and hadn't solved anything.

Mr Locke said New Zealand could assist Australia on asylum matters by increasing its annual take of refugees.

Mr Key said Australia, Canada and New Zealand were preferred destinations for boat people, but New Zealand was difficult to access.

He said a processing centre was likely to reward legitimate asylum seekers coming through the UNHCR system while blocking the illegal immigrants. What would happen to those illegal immigrants was not yet clear and whether such an arrangement would act as a deterrent was also difficult to assess.

Mr Key said more discussions about boat people would be held in the future and would be on a "no promises" basis, but coming up with a regional solution made sense.

(Source NZPA)