Prime Minister Helen Clark says the Commonwealth must suspend Zimbabwe if President Robert Mugabe refuses to stand down after winning re-election in a flawed ballot.
She was reacting to a scathing report by Commonwealth observers condemning the way last weekend's presidential elections were run.
Both Helen Clark and Foreign Minister Phil Goff have indicated a willingness to act outside the Commonwealth and impose travel and financial sanctions on the ruling elite in Zimbabwe.
The Government has acknowledged that a total ban on dealings with Zimbabwe would be largely symbolic because of the low level of trade.
The Prime Minister said Mr Goff would be giving a report and action timetable to the Cabinet on Monday while New Zealand waited for the Commonwealth to respond to the observers' report.
The Independent newspaper in London reported that Britain and the United States were backing a secret South African plan to persuade Mr Mugabe to form a Government of national unity with the Movement for Democratic Change.
South African President Thabo Mbeki sent his deputy, Jacob Zuma, to Harare to persuade Mr Mugabe to embrace the opposition and make its leader, Morgan Tsvangirai, Vice-President.
The Nigerian leader, Olusegun Obasanjo, was also said to be urging Mr Mugabe to quickly form a unity Government with "substantial representation" from the opposition.
A New Zealand observer at the election has no doubt that Mr Mugabe's victory was not legitimate. Bruce Middleton said the scathing preliminary report was "a
very honest and truthful statement of all that we had seen".
A more comprehensive report is being written which will go to the three-nation taskforce - South Africa, Nigeria and Australia - set up by the Commonwealth to decide what action to take.
Despite the observers' report, South Africa and Nigeria have indicated that they believe the result should stand. Australia is awaiting more information.
Mr Middleton said the report was the "considered view" of the observers, but not "everyone absolutely agreed on everything".
The full report would contain recommendations for the Commonwealth taskforce and more details of electoral abuse.
The observers' report said Mr Mugabe's re-election did not reflect the will of the people, disfranchised thousands and was held in a climate of fear. "Conditions in Zimbabwe did not adequately allow for a free expression of will by the electors."
However, some African nations, including South Africa, have begun to indicate support for the election.
Helen Clark is worried that a recommendation by the taskforce to do nothing would seriously damage the Commonwealth's standing.
British Prime Minister Tony Blair and 14 other European Union leaders have gathered for a summit in Barcelona to plan sanctions.
- STAFF REPORTER, NZPA, STAFF REPORTER
PM insists on suspension if Mugabe stays
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