Labour and Greens have pulled their support for a law change which cracks down on migrant exploitation because of their concern about significant new powers including warrantless searches of migrants' homes.
The Opposition parties initially supported the Immigration Amendment Bill (No 2) but now believe that it will will fail to help migrant workers because the punitive sanctions and lack of protection for abused employees will mean they are too afraid to report abuse.
The Labour Party's spokesman for labour issues Andrew Little said the motivations of the bill were good but some of the "coercive powers" were "open to abuse".
The changes followed reports about international students and temporary visa holders being underpaid, trapped on their employers' premises, and in the most extreme cases, forced into prostitution.
Immigration officials would be given a number of new tools to stamp out this kind of abuse.