Labour leader Chris Hipkins strikes back after Winston Peters' Nazi ...

Labour leader Chris Hipkins has struck back at Winston Peters, accusing him of behaving "like a drunk uncle at a wedding" after a controversial comparison to Nazi Germany.

Peters made the comments during his State of the Nation speech as New Zealand First leader, in which he compared the previous Government's approach to co-governance to Adolf Hitler's regime.

But Hipkins said the Deputy Prime Minister is "using racism and anti-media rhetoric to divide our country" - and said "Kiwis deserve better".

It wasn't a warm welcome waiting for Peters in Palmerston North as protesters charged him with genocide.

But through the doors a much more polite greeting was waiting - all building to the mother of all welcomes for the ultimate comeback king.

"It was a most surprising welcome. We've got over 600 seats here and standing room only but outside there is a group shouting out 'Winston go home'," Peters told his supporters.

The State of the Nation speech was shaping up to be a Peters classic to an adoring crowd.

But then he compared the last Labour Government's approach to co-governance to Nazi Germany.

"I've seen that sort of philosophy before. I saw it in Nazi Germany, we all did. We've seen it elsewhere around the world in the horrors of history," he said.

"But right here in our country, tolerated by people whose job was to keep the system honest, this happened - where some people's DNA made them better than others."

Peters later doubled down when questioned by the media if that comparison was appropriate.

"Because that's what it's based on. It's based on racial preference, based on someone being superior," he said.

The Holocaust Centre of New Zealand said Peters should know better.

"It's offensive to those who were lost and to the trauma of those who survived and are still here," spokesman Ben Kepes told Newshub.

Peters tried to brush off questions over how his speech would make the Jewish community feel - but couldn't dodge the question.

"Clairvoyant are you? Well, I think that they would understand entirely what I'm saying," he said.

Labour leader Hipkins also weighed in, telling Newshub it's the "same old Winston Peters" who's "using racism and anti-media rhetoric to divide our country".

"He should be focusing on the real work of leading New Zealand forward, but that would require a plan and a vision. Sadly, this Government is lacking in both," Hipkins said.

"I ruled out working with Winston Peters before the election. Every day that goes by I feel more and more vindicated by that decision. Kiwis deserve better than a Deputy Prime Minister who behaves like a drunk uncle at a wedding."

Peters also had some controversial words for Te Pāti Māori and the traditional ceremonial attire they wore when they were sworn in.

"They had half the plumage from the native birds on their head. Truly, I thought that they were protected, but they had half of them on their head," he said.

"And they're anti-mining, but they had half the greenstone around their chest."

Though Peters did make a point about the state of the Government's books, agreeing with a Sunday Star Times columnist that there was a $5.6 billion fiscal hole.

"He's right, but he's wrong when he said politicians were warned of that. 'Cause if he's right please show me where that warning came," Peters said.

The columnist was making the point that the parties' election promises didn't add up - Peters blames the economy.

"The growth rate is not what we thought it was, that's the real difference."

It was a day of very real differences, particularly when he compared co-governance to Nazi policies.