England suffered an embarrassing 10-wicket defeat against the Black Caps in Hamilton today to go 2-0 down in the five-match one-day series.
Paul Collingwood's one-day side had been the bright spot for England with the Test team struggling, and Gooch feels it must show rapid improvement if it is to reclaim the Ashes from Australia on home soil.
"New Zealand are not the strongest side in the world, they are workmanlike," he told Setanta Sports News.
"If England want to be going forward and improving enough to win a major competition, they've got to be making progress and beating sides like New Zealand."
"If they are not beating New Zealand they are not making the progress needed to beat Australia in a year's time."
The batsmen again failed in Hamilton, with three run-outs contributing to a total of only 158. The Black Caps then reached a revised target of 165 from only 109 balls.
"England have just thrown it away again," said Gooch.
"That's six run-outs in two games, which shows the confidence is not there."
"At Wellington the running between the wickets was schoolboy. If I got run out once a season that was enough."
"When you are defending a low score like that you have to defend tight and stick to a plan - England didn't look like they had a plan."
"New Zealand knocked off the runs with 18 overs to spare - that is a drubbing. They need everyone in the dressing room to be honest now."
Gooch also criticised the decision to bring opener Andrew Strauss back into the side for the forthcoming Test series against the Black Caps.
"The last place in the Test side will be between Andrew Strauss and Owais Shah - I don't know why they brought Strauss back to be honest," he said.
"I don't think he's done enough to make a case for regaining his place. I am certainly against him opening the batting because (Alastair) Cook and (Michael) Vaughan is the ideal opening partnership."