Updated 2.27pm: New Zealand was alerted to a people-smuggling boat with 65 people on board that was headed to New Zealand, according to Prime Minister John Key.

He said it was steel-hulled and there was every likelihood it could have made it to New Zealand.

"The advice we had was that it had the capability of making it all the way to New Zealand so we alerted the systems that we have in the way that we would work through those processes."

The boat put out a distress call in relation to sick people on board and it was boarded by Australian authorities.

Mr Key said he did not know what had happened to the people on the boat but he understood the boat was sent back to Indonesia.

"It fits in with what I have been saying for quite some time, that these people smugglers are going to get hold of more robust boats, with better capability of a steel-hulled boat, so it certainly could have made it to New Zealand."

Speaking to reporters at Parliament this morning, Mr Key said he did not know the nationality of the people on board, but there has been a recent stream of Rohingya asymlum seekers from Myanmar and from Bangladesh.

Mr Key said the concern would be that if one boat made it New Zealand "it would open up a pretty easy pathway to replicate".

But Labour is pouring scorn on the Government's claims that a boat carrying 65 refugees could have made it to New Zealand.

Andrew Little said the Government's using diversionary tactics to steer debate away from the real issues like falling dairy prices.

"The risk or threat of refugee boats coming down as far as New Zealand is so minimal, frankly there is no need to panic or overreact."

Andrew Little said such a voyage would be nigh on impossible.

"Taking a boat and sailing from whichever part of Asia, right across into the Pacific and the Tasman seas, given the nature of those seas, people might have contemplated it but it has never happened. And it's most unlikely to happen given the nature of the conditions there."

ABC News reported today that Indonesian police said the boat had crashed onto a reef after being turned around by Australian authorities.

The passengers included 54 Sri Lankans, 10 Bangladeshis, one person from Myanmar and five additional crew.

Among the passengers were four women and three toddlers, it was reported.

The passengers told police they were trying to get to New Zealand.

The passengers were now being held on Rote Island off West Timor. They had crashed into a reef near Landuti Island, and were found by fishermen.

Mr Key would not say when the events happened but according to AFP and ABC it was in the past few days.

If this particular boat had got closer, New Zealand would have had a range of options depending on how close it was.

"We didn't get to the point where we had to make some of those tougher calls," Mr Key said.

A law change in 2013 gave the Government greater powers to manage a "mass arrival" of asylum seekers, which was defined as more than 30 people.

In the event of a mass arrival on New Zealand shores, the Government has power to detain them for up to six months.

This detention could be extended by 28 days at a time with approval from a District Court judge.

The detention powers were designed to allow agencies to inquire about asylum seekers' backgrounds and check any pending refugee claims.

Australia's action against asylum-seekers in boats toughened when the conservative Coalition Government replaced Labor in 2013 and according to AFP, since then Australia has stopped 18 boats from reaching its shores.

Those who make it are sent to refugee camps in Nauru or Papua New Guinea or boats are escorted back to their country of origin.