"But the Government is forcing everyone arriving into New Zealand - who have passed a pre-departure test - to isolate for seven days. It doesn't make any sense," he said.
Luxon said people arriving into the country should "have to take a test on arrival".
"If positive they should isolate. If not then they should be free to go about their business," Luxon said.
"The current rule is an unnecessary requirement that serves as a massive hurdle for Kiwis wanting to come home to visit family, or tourists wanting to come to New Zealand," he said.
Luxon said the Government should currently be allowing Kiwis from anywhere in the world to return home, not just those based in Australia.
Currently, returning New Zealanders from outside Australia and some Pacific Islands, must wait until midnight on March 13 before being allowed to skip MIQ. They will still have to self-isolate.
"The border should be open right now for Kiwis anywhere in the world to return home, without going through MIQ," Luxon said.
"Then we should quickly open to tourists and other visa holders too," he said.
Tourists from Australia and visa waiver countries will have to wait until July to travel to New Zealand. They will still have to isolate on return. Luxon said this timeframe should be accelerated.
"It is nuts that Aussies keen to come here for a long weekend have to wait until July and still have to isolate, and that other split migrant families must wait until the end of the year," Luxon said.
"MIQ made sense when the border was our best defence against Covid. But with almost 15,000 daily community cases of Omicron and just 41 coming through the border Kiwis are now far more likely to get Covid in the community than from international arrivals," he said.