Don Brash says the ACT Party faces oblivion unless it changes its leader before the next election.
The former National Party leader, who is seeking a return to politics, plans to challenge Rodney Hide for the party's leadership.
Dr Brash told Morning Report there is recognition among the ACT party caucus and the general public that he has the ability to lift the party above the 5% threshold at this year's election.
However, he would first have to get the support of at least three ACT MPs, and the backing of at least five board members.
He said that if his challenge is unsuccessful, he may establish a new political party.
Dr Brash, 70, says he is concerned by the current government's borrow-and-spend policies.
He told Morning Report that government spending at present is higher than during the previous Labour government.
He is also keen to see a "one law for all" policy put into practice when it comes to race relations.
Former ACT MP Deborah Coddington told Morning Report that Dr Brash will have a fight on his hands as the board is not strong and does whatever Mr Hide tells them to do.
Otago University political analyst Bryce Edwards said the situation with ACT is the National Party's worst nightmare, as it wants a stable coalition partner.
He said there is no room on the political landscape for two right-wing parties.
ACT president Chris Simmons says there will be no leadership challenge at the party's board meeting this Saturday as process must be followed.
He told Nine to Noon that Dr Brash has to join the party first and must then give seven days' notice of his intention to challenge the leadership.
Mr Simmons said it is hard to imagine how the challenge will play out, as some of Dr Brash's proposals are unpalatable - including his plan to stand former Auckland mayor John Banks in the seat of Epsom, which is currently held by Mr Hide.