The NSW Labor leader's comments on Asian migration are "absolutely" racist, Premier Gladys Berejiklian has said in an escalation of her attack on Michael Daley.
The premier on Wednesday condemned as racist Mr Daley's suggestion in September 2018 that skilled Asian migrants were taking local jobs.
A day earlier she was only prepared to label the comments "hypocritical" and "offensive".
"Absolutely it was, absolutely, absolutely, I can't stress that enough," Ms Berejiklian told AAP when asked if the opposition leader's remark was racist.
Video footage emerged on Monday of Mr Daley telling a Blue Mountains pub forum last year that highly-skilled Asian migrants were forcing Australian-born workers to "flee" Sydney.
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"Our young children will flee and who are they being replaced with? They are being replaced by young people from typically Asia with PhDs," he said.
Ms Berejiklian on Wednesday denied she'd initially held back from condemning Mr Daley's words.
"It's not that I've held back at all, quite the opposite, I don't want to draw attention to what he said, it's so hurtful and divisive," Ms Berejiklian said.
"Words matter and when you use a particular group of people as a scapegoat that actually causes a lot of hurt. I've been at the receiving end, I know what it's like."
The premier - who is of Armenian descent - said Mr Daley had "crossed the line" with his comments.
That's the same term she used against Mr Daley's predecessor, Luke Foley, when the then-opposition leader used the term "white flight" in 2018.
"What he (Mr Daley) said was extremely divisive, it was offensive. It crossed the line, it absolutely crossed the line," Ms Berejiklian said.
"I was deeply hurt by it."
Mr Daley issued an unqualified apology on Wednesday telling reporters he was not a racist.
"I never have been, people who know me, know that I'm not," the Labor leader said.
"I did use words that I shouldn't have, I accept that and my apology is unqualified."
Voters go to the polls in the state election on Saturday.
