However, Mr Key has today said the National Government will not be capping immigration.

"There are natural flows that happen when it comes to migration. When you look at what drives migration at the moment, for a large part it is New Zealanders returning or Australians coming over here or people coming on working holiday programmes or students and I think that's broadly about right."

But Labour leader Andrew Little called for a cut back on work permits.

"There is no question the Government is letting too many people in at a time when our labour market can't utilise everyone here at the moment and they've got to slow it down.

"We shouldn't be issuing work permits to people from overseas to come here when we've got problems here already internally.

"We're issuing too may work permits; when the economy slows down, of course we're going to have problems," Mr Little says.

New Zealand First leader Winston Peters said the "open door immigration policy" needs to be closed so the country "brings people here that we need, not who need us".

"We've been bringing in a whole lot of low-skilled people that have driven wages down, we've kept our economy going by immigration consumption otherwise we would have a lousy 0.5 percent of GDP growth per annum at the moment."

He says changing immigration policy is a priority to help ease the pressure on infrastructure across the country, but particularly in Auckland.

Immigration numbers should be brought back by around 10,000 people, Mr Peters says.

"We brought in almost 10,000 chefs in the last five years - that's more than every restaurant and cafe put together."

Parliament resumed after a one-month break today and the Government was once again on the defensive over housing.

When asked if the Government would put a stop to immigration, Mr Key said the country was tied to conditions in a number of free trade agreements.

"I don't think there's a need to go and change the number of students we have or people on working holidays because they're reciprocal embedded rights we negotiate as part of our free trade agreement.

"In terms of the skilled category, we always look at those particular areas to see if those settings are right. If we have more people than we need then of course we won't bring in people from overseas."

He says in the past, the Government has taken 56 occupations of the skilled migrant visa list "so we do control migration in that form".

"But you wouldn't want to stop for instance our IT sector or other sectors simply because there's some pressure on the housing market."