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A review of New Zealand's refugee quota is scheduled for next year. But as pressure mounts on the Government to do its bit in helping the millions displaced across Europe, Mr Key told reporters in Christchurch today that "we're not ruling out doing more".
"We're not ruling out looking at whether there is more that we could possibly do earlier and maybe specifically in relation to what we are seeing at the moment."
However, he stressed that New Zealand's current policy was not just focused on taking refugees, but also providing funding for refugee camps in countries like Turkey and Jordan.
Mr Key's comments come as a heartbreaking photo of the tiny body of a refugee boy who died alongside his brother and mother on the perilous journey across the Mediterranean shocked the world.
Scenes coming out of Europe and the Middle East have put pressure on all countries to address what is an escalating refugee crisis.
Mr Key said today: "Our hearts go out to people who find themselves displaced and in very very difficult conditions."
"Like everybody, we understand the enormity of the issue and we understand the pain and suffering people are going through.
"We're not only helping to build out those refugee camps but we're also building schools there so that we can provide education for young people.
"Pouring money, for instance, into facilities in places like Turkey, educating young people who ultimately might want to return one day if Isil (Islamic State) can be defeated, can also be a very important thing to do. We're looking at a range of things.
"Of course we take refugees - that's one part of what we're doing."
Mr Key said he was still taking advice on whether New Zealand could take more refugees, and still provide them with the level of support they currently get.
New Zealand takes its refugees through the United Nations High Commissioner for Refugees programme.
Mr Key today said he didn't have "as much control as people might think" on which refugees New Zealand takes.
"If we were, for instance, to take more, I think New Zealanders would broadly want an assurance that they're probably some of the people they're seeing displaced at the moment - not that their plight is any better or worse than others."
While the taking of any refugees is "utterly crucial" for the individuals fleeing a country in turmoil, it would "still be somewhat symbolic", Mr Key said, given there are 58 million people displaced across the world, and 20 million in refugee camps internationally.
"This has been more pronounced in recent times, but [it is] a very long-standing issue," Mr Key said.
"In reality, if we were to take a small number more, it's a tiny tiny tiny fraction of the issue... I'm not diminishing that, I'm simply saying there are many other things that I think we need to consider and look at and weigh up and we're doing that.
"It's not just solely a matter of saying, 'take more refugees, it's an answer to the problem'.
"It's a global problem. I accept everyone needs to take their fair share of responsibility but actually as a government we have been doing quite a lot over recent years and I have every confidence we'll do more in the future.
"I can watch the TV screens like everybody else and I can feel great sympathy for the people that are there. But I've also got to make sure that if we take any further steps that they are professionally handled and that we can deal with them properly."
Mr Key understood the cost for taking in 750 refugees equated to around $60m, so any increase to the current numbers would "cost tens of millions more".
Labour leader Andrew Little called on Mr Key to show "moral leadership" and increase New Zealand's refugee quota.
"The Prime Minister said it was an act of leadership when he committed $65 million to have 16 military trainers in Iraq, but he has no money for extra help for refugees," Mr Little said.
"The flag issue should have been about who we are as a nation. This issue is just that. How Kiwis react to desperate people fleeing terror on the other side of the world is about who we are as a people. It's about who John Key is as a leader."
The photo of the drowned boy has illustrated the tragedy of the refugee crisis.
Galip (5) and Aylan Kurdi (3) were on an overcrowded dinghy filled with refugees fleeing the war in Syria when it capsized shortly into the crossing to the Greek island of Kos.
Pictures of Aylan's limp body in the sand and of it being carried by a local gendarme has come to epitomise the crisis engulfing Europe as a tide of humanity flees the horrors in the Middle East.
Another mother was pictured grief-stricken after losing two of her children, aged 9 and 11.
Aylan and Galip, who were not wearing lifejackets, did not stand a chance when the boat overturned in the dead of night, some 30 minutes after it set off at around 2am from the holiday resort of Bodrum in Turkey.
All 16 passengers were flung into the Mediterranean, and despite the calm water, Galip and Aylan drowned.
Their lifeless bodies, still clad in tiny T-shirts and shorts, washed up on the beach in Bodrum today and boatmen alerted the authorities.
A heartbreaking photograph of a Turkish gendarme cradling one of the boys in his arms emerged shortly after the tragedy and video footage showed the body of the second.
Of the 16 passengers, 13 - including the Kurdish brothers and their mother - are believed to have died. The death toll includes five children.