Silver Fern Farms chief executive Keith Cooper said while Federated Farmers debate the cost of traceability, Australian meat exporters now have a marketing advantage.
"Australian exporters can turn up in our markets and say they can offer traceability, which New Zealand can't."
Meat and Wool New Zealand chairman Mike Petersen said Australia extended its sheep traceability system after failing a European Union audit, an audit which New Zealand passed.
Mr Cooper questioned why Australia was being so compliant when it has just a 17,600-tonne EU sheep meat quota.
New Zealand's quota is 227,000 tonnes.
"They are looking at the bigger picture, to lead traceability compliance which puts them in good light in advocating to get Australian tonnage to the EU increased."
That would either come at the expense of New Zealand's quota or by increasing Australia's.
Either way, he said it was not good for New Zealand exports.
Federated Farmers has resisted a proposed national animal identification and traceability (NAIT) system for deer and cattle, saying its benefits had not been proven, and it was time-consuming and costly.
It does not want it extended to sheep.
In a move that has caught New Zealand farm and industry leaders by surprise, all 80 million Australian sheep must be tagged before leaving their property of birth, and Meat and Livestock Australia (MLA) was also considering implementing mandatory recording of mobs of sheep which were sold.
Information on the mob's origin and destination would be recorded in a central database.
Meat and Wool New Zealand chairman Mike Pedersen was surprised Australia was introducing a scheme for sheep, saying he understood markets were more concerned with traceability for cattle and deer than sheep.
"There are no drivers internationally for this to happen for sheep," he said in an interview.
An estimated 80% of New Zealand sheep only left their farm of their birth to be slaughtered, unlike Australia when many lambs were sent to feedlots to be finished.
Mr Pedersen said declaration forms meant New Zealand had a "robust" traceability system.
It accompanied sheep that were sold and identified which "batch" the sheep came from, but not individuals.
