New Zealand Prime Minister John Key in surprise resignation

John Key has announced that he will resign as prime minister of New Zealand, after eight years in the job, citing family reasons.

Calling it "the hardest decision I've ever made," an emotional Mr Key said: "I don't know what I'll do next."

Mr Key, a popular leader, said it was a personal decision, and later denied media reports his wife of 32 years, Bronagh, had given him an ultimatum.

He said he would not be seeking a fourth term in the 2017 election.

Deputy Prime Minister Bill English is likely to take over until the National party holds a caucus to choose a new leader.

Mr Key made the surprise announcement during his weekly press conference. He set a date of 12 December for the formal resignation.

He said his job required great sacrifices "from those who are dearest to me" and that his children had coped with "an extraordinary level of intrusion".

"All I can say is that I gave it everything I had. I have left nothing in the tank."

Referring to his wife, he told radio program Newstalk: "We talked about it and she likes the concept of me being home more but there was no ultimatum."

Mr Key, who was formerly at Merrill Lynch as a foreign exchange dealer, ended nine years of Labour Party rule in 2008 when he ousted Helen Clark as prime minister.

He won a third term for the National Party at elections in September 2014.

Opposition Labour leader Andrew Little said Mr Key "has served New Zealand generously and with dedication. I wish him and his family the best for the future".

Green Party co-leader Meteria Turei also wished him well.

"I fought every day against John's politics but always supported his right to be a dad and a husband first," she tweeted.

Known by the local media as "Teflon John" because very little controversy has stuck to him during his time in office, Mr Key is credited with steering New Zealand through the 2008 global economic crisis and out of recession.

He has sought to build closer ties with the US, taking a leading role in supporting President Barack Obama's Trans Pacific Partnership (TPP) - a 12 country trade deal covering 40% of the world economy.

However Donald Trump's recent victory in the US has derailed that process, with his announcement the US would be quitting the TPP on his first day in office in January.

Australian Prime Minister Malcolm Turnbull, a close political ally, said that on learning of Mr Key's resignation, he sent him a text message reading "say it ain't so, bro".

Mr Turnbull said New Zealand had boxed above its weight under Mr Key's leadership, and his departure will be "a great loss to New Zealand and a great loss to the world".

Former Australian prime minister Tony Abbott played on their two countries' cricketing rivalry to say Mr Key had enjoyed a "fine innings".

"Not many pollies retire unbeaten on a double ton," he tweeted.

Australian Opposition Leader Bill Shorten said: "John Key has been a good friend to Australia. I wish him and his family all the best."