"It is a treacherous, dangerous journey and people who attempt to make it are putting their lives at risk," Lees-Galloway said.
"However, New Zealand remains a target for people-smugglers, and what this funding will do will give us additional resources in terms of more staff and more technology to disrupt potential ventures before they embark on this dangerous journey because we want to protect lives."
He said the risk had increased in recent years, but Shaw disagreed.
"We don't think there's any great risk of mass arrivals in New Zealand and we've communicated that to the Minister," Shaw said.
"We think that money would be better spent elsewhere."
Prime Minister Jacinda Ardern defended the new money, saying it was aimed at stopping people from boarding any boats in the first place.
She said the money was not about any change in policy, which had been the same for over a decade.
Last year Australia's then-Immigration Minister Peter Dutton criticised New Zealand for relying too much on Australia to tackle the issue of boat people.
"New Zealand don't contribute really anything to the defence effort that we've got where we're trying to surveil boats that might be on their way to New Zealand, so I hope that [Justice Minister] Andrew Little reflects a little more on the relationship between Australia and New Zealand where we do a lot of the heavy lifting," Dutton told The Australian.
Lees-Galloway said he was not bowing to pressure from Australia.
"I met Mr Dutton on a couple of occasions last year. We talked about the importance of taking a regional approach ... but there's been absolutely no pressure from the Australian Government.
"This is a decision New Zealand has made."
Asked what wellbeing principles this funding aligned with, he said it was about keeping people safe.
"We are certainly aware that New Zealand has been a target for people-smugglers, and the sophistication of those attempts is increasing," Lees-Galloway said.
"The journey to New Zealand is something they'd be prepared to risk their lives [for] ... New Zealand is a wonderful country and people see it as a place full of opportunities, and sadly there are people in the world who are prepared to risk everything."
New Zealand First leader Winston Peters also defended the new money.
"It makes good economic sense and social sense as well. If you allow people get away with trafficking people, the chances of them dying in the high seas is huge.
"We have a social conscience."
