Simon Bridges says Winston Peters' claim the National Party is "moribund" is "very hurtful", but will backfire.
Mr Peters, Deputy Prime Minister and leader of NZ First, made the comments at his party's 25th anniversary celebrations on Sunday.
"National is leaderless," he said. "It's moribund and it's vacuous and it's got bitter and jealous."
According to Mirriam-Webster, moribund means "being in the state of dying" or "approaching death".
Mr Peters also predicted Mr Bridges would be rolled before the next election, saying "no party can stand that sort of lack of leadership and survive long".
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Mr Bridges on Sunday said he wouldn't dignify Mr Peters with a response, but appears to have changed his mind overnight.
"These are very hurtful comments," he told The AM Show on Monday morning, before turning a phrase Mr Peters used two weeks ago back on the 73-year-old veteran.
"I think he must be worried about both how he's doing and his party's doing, but I also think as he said it himself, the dysfunction junction amongst the party.
"It's a classic Winston distraction from huge issues at the moment - petrol prices and the massive rise there to historic highs, being the biggest - but it's rent increases and electricity coming as well. So it's a distraction tactic."
Mr Bridges said he has no plans to step down as leader, even if support for the party dropped into the 30s.
"Why would I do that when I'm leader of the most popularly supported party in New Zealand?"
Even with the latest polls putting them in the 40s, National will struggle to form a Government in 2020 without a coalition partner. Mr Bridges won't rule out playing nice with Mr Peters if that's what it takes to become Prime Minister, and suggested Mr Peters' attacks would actually help him.
"What do they say about publicity? I think we'll be fine. I know I'll be fine."