New Zealand faces a healthcare time-bomb as a new report ranks the country once touted for its outdoorsy, fit population as the third-fattest nation after Mexico and the US.

Health authorities fear disease and complications caused by obesity will soak up scarce health funding and dumb down a nation due to unhealthy, undernourished children.

Health sector lobbyists have criticised the government's funding cuts to nutrition programmes and to public messages to encourage physical activity, and the scrapping of regulations curbing fatty foods in school tuckshops.

Obesity is linked to heart disease, stroke and type 2 diabetes.

The Health Data 2009 report, published this month, shows each of the 30 countries monitored by the Organisation for Economic Co-operation and Development (OECD) are getting fatter.

The report puts New Zealand's obesity rate at 26.5 per cent in 2007, Mexico was at 30 per cent in 2006 and the United States led with 34.3 per cent of its population classed as obese in 2006.

The latest figure for Australia was 21.7 per cent in 1999.

Health Minister Tony Ryall said the Government planned to announce programmes "around physical activity" and sports "in due course" but gave no further details.

Labour health spokeswoman Ruth Dyson said National's cuts were "shallow and short-sighted. There is a cost to the system and New Zealand will pay for it big time."

Dr Robyn Toomath, a diabetes specialist and Fight the Obesity Epidemic spokeswoman, said overseas doctors were stunned at the rate of Type 2 diabetes in the country.

"In the middle of the swine flu epidemic, the people having most difficulty getting on top of their chest infections are the obese individuals people for whom coughing and keeping their lungs clear is a real mechanical problem," she said.

"There are myriad effects of obesity ... [The Government has] ignored advice and gone one step further and actually reversed minimal nutritional guidelines in schools.

"Obesity rates go up and the response from Government is one of complete denial. All we've seen is an unravelling of efforts designed to stop obesity."

Public health nutritionist Bronwen King said the Government's decreasing commitment to preventing obesity would "ensure we continue to enjoy the status of being one of the fattest nations of the world".

Current trends to eat more processed foods would lead to obesity and undernourishment, resulting in children unable to reach their full intellectual capacity, she said.

The report also showed smoking rates among New Zealand adults had decreased from 30 per cent in 1985 to 18.1 per cent in 2007 the fourth-lowest among OECD countries.

Leigh Sturgiss, executive director of the Obesity Action Coalition, said the Government needed a similar sort of campaign to the one against smoking to tackle obesity rates.

"There needs to be tough regulation of what can be advertised to children," she said.

"Foods that are heavily promoted come in huge portion sizes and are high in salt, sugar and fat.

"Our kids are getting bigger and developing chronic diseases for it.

"Have we got the money in the bank when the diseases people suffer from take hold?

"More money should be spent on preventing people getting into the hospital system in the first place."