Prime Minister Christopher Luxon has condemned Winston Peters' comments about a Green MP as "racist" and "outrageous", but says he maintains confidence in him as Foreign Minister.

He is not worried about New Zealand's relationship with China, saying "career politician" Peters has had a lot of spats with the ambassador "over many many years".

Accusing the New Zealand First leader of "playing a game", Luxon has avoided sacking him as suggested by former political leaders and the opposition - instead using the opportunity to ask for votes.

Luxon told reporters Peters' comments were "very offensive and completely inappropriate", and asked directly if they were racist, he agreed.

"Lawrence Xu-nan is a full equal Kiwi - as much as a Kiwi as Winston Peters - and he deserves to be able to say whatever he wants to say in Parliament in the same way Winston Peters says what he says."

He thought Peters' comments were deliberate.

"He's a career politician. He's been there for 40-plus years. He's using language that's deliberate to get attention from the media and from others on himself. He had a pretty bad week with New Zealand First last week, and I get that, but I just think we're beyond the distractions and the sideshows."

However, he said he still had confidence in Peters as Foreign Minister.

"Yes, I mean he's been successful as a foreign minister, but the reality is we're now in full-blown campaign mode."

Luxon said Peters had a history of spats with the Chinese Ambassador, who commented on Thursday, but the relationship between the two countries was longstanding and "in really good heart".

"We're three months out from an election. Kiwis get to decide what happens next, and I just say to you, think very deeply about your vote, I want 100 percent of the seats around that Cabinet table to be National party ministers - that's why I keep saying 100 percent party vote National."

When asked if he would sack Peters as Foreign Minister if China demanded it, he said that was "hypothetical".

Luxon was making the comments at the afternoon public meeting in Tauranga - a seat held by National since 1938, apart from a stint between 1993 and 2005 when it was held by Peters himself.

Peters had on Wednesday responded to heckling from Xu-nan during a general debate speech with a tirade where he told the Chinese-born New Zealand citizen to "go back to your own country".

"That's where they lie like a flatfish, but they don't lie like that here, all right?" Peters said. "This is called a democracy, unlike what you're used to."

The comments have drawn criticism from across Parliament, with National's campaign chair Simeon Brown calling them racist, while National and ACT's leaders Luxon and David Seymour said they were inappropriate and attention-seeking.

The opposition has gone further, saying Peters should be sacked as Foreign Minister - a position echoed by former leaders Helen Clark and Don Brash.

'We have legal immigration in this country'

Luxon had earlier responded to questions at the public meeting from one woman who put the problem bluntly.

"Excuse my language sir, but there is a s--- of a man who is destroying this country. Last term it was the Chinese, this term it's the Indians. What are you going to do with Winston Peters," one woman asked him.

"He is insulting this country globally and he is getting away with it and he is destroying race relations in this country, sir it has got to stop."

"Well said," Luxon responded, "I wouldn't expect anything less".

He said the answer was "pretty simple".

"Party vote National," he said, to applause.

"Because you may like some things that Winston Peters says, but the bottom line is he opposed the China FTA, he opposed the Indian FTA, he was part of a government that banned oil and gas causing electricity crisis in New Zealand in 2024 that meant people lost their jobs.

"And also he's the person that put Jacinda Ardern into power and wrecked our economy. So let's be a little straight up about it."

He said unlike the United States, England, Germany, France and other jurisdictions, New Zealand's immigration was focused on building infrastructure and had shifted to high-skill migrants.

"I'm just saying to you, there's a game going on here and let's be honest about it because I want you to understand a few things: It's very easy to denigrate immigrants and to drive xenophobia in this country ... he's trying to talk about a problem that we don't have.

"He may think he's Nigel Farage and Marine Le Pen and Pauline Hanson and Donald Trump, but ... we have legal immigration in this country."

He defended the Green MP Lawrence Xu-nan who Peters had criticised in Parliament, saying he had "as equal right be in that Parliament and as a first class citizen in the same way that Winston Peters may be as well".

"There is no difference. He is a Kiwi and he deserves to talk. You may disagree with what he says, but in a democracy, that's how it goes. And he deserves to say in Parliament what he wishes to represent and say in the same way that Winston Peters demands that he can say that too."

He repeated previous comments backing migrants, saying they came to New Zealand leaving everything behind and worked "really hard, they take one job, they take two jobs, three jobs to get a deposit for a house or a business ... they don't go on welfare, and they get their kids and they wake up every day and get them to school".

"They have made New Zealand a better place and they have achieved and contributed to this place and we should be thankful that they've chosen this as their home."