Business New Zealand says the high rate of youth unemployment shows there are poor links between education institutions and the workplace.
Latest labour market figures issued by Statistics New Zealand show the youth unemployment rate has risen to 27.5%.
Maori unemployment rose to 16.1%.
Business NZ says the figures are some of the highest for countries within the Organisation of Economic Co-operation and Development and it's a timebomb.
Chief executive Phil O'Reilly says the rate is very high, particularly for 15 to 19 year olds, which shows the right skills are not being taught to young people.
Short-term Government measures, such as recently announced subsidies, are a good start - but the educational pathways need improvement, he says.