Winston Peters says our trading partners will judge us if New Zealand does not "step-up" and play its role by increasing defence spending.
The United Kingdom announced this week that it would up its defence spending to 2.5 percent of GDP by 2027.
New Zealand's defence capability plan is due to be released by Defence Minister Judith Collins in the coming months, ahead of the May Budget, which will outline defence spending and equipment upgrades.
The plan has been pushed out since last year, but both the prime minister and Collins have indicated New Zealand would need to get closer to a 2 percent of GDP spend given the challenging geopolitical world we now live in.
There's also been a suggestion that if New Zealand intends on joining AUKUS pillar two, then Australia, the US and UK would expect New Zealand to come to the table with something to offer, namely greater defence capability.
Peters, speaking to RNZ in Seoul where he's just met with the foreign minister there, said the government needs to "get over 2 percent" when the capability plan is announced.
"Two percent doesn't cut it, not when you've done so little over the past three years."
He said in 2017 much of the Defence Force's equipment was modernised and now it's a case of trying to "make-up the backlog of doing nothing".
"Two percent doesn't cut it now - we've got to step-up and play our role in a very changed and challenging world.
"Our whole trade and economic future depends upon that, because countries are judging us by it," he told RNZ.
"I'm sitting here in South Korea - that's one country that is going to judge us by it.
"So are our neighbours, so will countries in Europe who are stepping up with 2.5 percent of GDP."
Peters comments came after a meeting in Seoul with Hyundai, the company that the government last year cancelled a contract with to build two mega ferries to replace the ageing Interislanders.
Peters as new Rail Minister has since embarked on a world-wide tender to find, by the end of March, a builder for two cheaper and smaller rail-enabled ferries, and have them running by 2029.
He said Hyundai was open to considering bidding to build the new smaller ferries and had indicated it could meet the size specifications involved in that.
"I've got a serious contender back in the ring of potential contenders for the tender for two replacement ferries for the Cook Strait,' he told RNZ.
Korea is world-renowned for its ship building and that needs to be remembered, Peters said.
He hinted South Korea could be called upon to help New Zealand with the modernising of its defence capability, though added that was not the purpose of the meeting.
"The reality is that in 2016 we made a very serious investment in defence expenditure with South Korea, and we could see going forward the possibility of that, but that's not the reason we met today.
"But in terms of their capacity to build ships, they're the world number one ship builder, they also have a serious defence capability as well. Talking about our meeting, those weren't our considerations, but keeping abreast of a country that size doing so well is important to us," he said.
A country still on the "rise" internationally and with "enormous trade links not just in Asia but around the world" means it's an important relationship for New Zealand, Peters said.
"You see projects they're doing, which means they're important in defence procurement."
New Zealand is working on a comprehensive strategic partnership deal with South Korea - it is hoped the details will be finalised by the time Seoul hosts the APEC summit later this year.
"We had confirmation this evening that will be happening," Peters told RNZ.
His trip to Seoul comes off the back of a visit to Beijing earlier this week where Peters raised both the issue of the Chinese vessels in the Tasman Sea and the deals signed with the Cook Islands in his meeting with his counterpart Wang Yi.
Reflecting on that meeting, Peters told RNZ, he was "very pleased with the very frank and very open conversation we had".
On the new United States administration under President Donald Trump, Peters said it paid not to get caught up in the controversy and headlines early on.
"The lesson of experience in politics is, don't get caught up in the controversy, wait and see what it all means, wait until the dust settles, and I'm confident we'll know where to go when that all happens."
