WELLINGTON -- Prime Minister John Key's resignation announcement on Monday has shocked New Zealand and could serve as an impetus for Labour and the Green Party, which are working together to defeat Key's popular center-right National Party in next year's election.
A large part of the National Party's enduring support is due to the popularity of Key and with him removed, the opposition parties could be in a better position to compete, although Key's legacy of success means that they face an uphill task. The 55-year-old remains a favorite in opinion polls despite eight years in power and his party had been tipped to win an election due late next year.
But Key said some leaders made the mistake of staying in power too long and while the decision had been the hardest of his life, a change would be good for his party.
"I absolutely believe we can win the next election. But I do not believe that, if you asked me if I was committed to serving out a fourth term, that I could look the public in the eye and say 'yes,'" he told reporters, his voice shaky with emotion. "All I can say is that I gave it everything I had. I have nothing left in the tank."
Key told a press conference his ruling National Party would meet to elect a new leader and prime minister on Dec. 12. He said Deputy Prime Minister and Finance Minister Bill English would get his vote if he chose to stand for the leadership.
Key and his government are held in high regard by many New Zealanders for steering the country safely through the global financial crisis in 2008 and the 2011 Christchurch earthquake that killed 185 people and required the rebuilding of much of the business district of the South Island's largest city.
He spoke of the sacrifices of his wife and two children since he became prime minister in 2008 and said he had no concrete plans for life after politics except maybe joining some company boards in New Zealand and overseas. Before entering politics in 2002, Key, a millionaire with an estimated fortune of 60 million New Zealand dollars ($43 million), was global head of foreign exchange for Merrill Lynch in London.
The New Zealand dollar fell to $0.7098 after the news, from $0.7118 at the start of the day, but market analysts said they did not see any significant changes to economic policy in the short term. The leading New Zealand Stock Exchange index fell 0.7% but analysts said negative offshore leads, including the resignation of Italian Prime Minister Matteo Renzi, were the major causes.
There has been no pressure on Key to resign from within his party, which realizes his personal popularity has been important for its three election victories since 2008. The National Party still retains the support of around 50% of voters in a poll released last week, with the main opposition center-left Labour Party trailing far behind at less than 30%.
Under Key's leadership, reform has been gradual. While some decisions have been controversial, such as the partial sale of state assets and tax cuts, his government has been careful not to get too far ahead of public opinion.
The country's economy is growing at over 3% due to strong construction and tourism activity and a recovering global dairy market. The government's finances are healthy with debt low by international standards and the budget is in surplus. Nonetheless, New Zealand is not immune to the global slowdown. The Reserve Bank of New Zealand cut the official interest rate by 25 basis points to 1.75% on Nov. 10, citing weak global inflation and strength in the New Zealand dollar.
But it is highly unlikely there would be any major changes to economic policy in the short term, particularly if English took over the leadership. With Key's endorsement, it is likely English would win a leadership ballot, although he led the National Party to a heavy election defeat in 2002 during two years as opposition leader.
English said he would need to consult his family and the party before he made a decision whether to throw his hat in. He paid tribute to the outgoing prime minister, saying his leadership had ensured New Zealand was one of the most desirable places to live, work and raise a family in the world.
"John Key's intelligence, optimism and integrity as leader of the National Party and prime minister of New Zealand means he will be judged by history as one of New Zealand's greatest leaders," he said.
Other possible candidates include Economic Development Minister Steven Joyce, Social Housing and Climate Change Minister Paula Bennett, and Corrections and Police Minister Judith Collins.
Andrew Little, leader of the opposition Labour Party, said Key had served New Zealand generously and with dedication.
"The Prime Minister has served New Zealand through times of considerable global instability, and will leave politics proud of his achievements," he said.
In a poll by Australian research agency Colmar Brunton in late November, Key had 36% support as preferred prime minister and Little, seen as much less charismatic, was at just 8%.
Labour won the Mt. Roskill by-election in Auckland on Saturday with more than double the number of votes received by the National candidate. The electorate is traditionally Labour, although the margin of victory was a surprise to many.
Key's easygoing manner and informality strikes a chord with many New Zealanders. But his jokey style occasionally got him into trouble, including when a waitress complained last year about Key repeatedly tugging at her ponytail.
Key's rags to riches life story is also part of his image. He was brought up with two sisters by his widowed Jewish refugee mother in social housing in Christchurch before growing up to become a currency trader and investment banker. As a boy he told his sisters his aims were to make a million dollars and become prime minister.
Australian Prime Minister Malcolm Turnbull said Key would be a great loss to New Zealand and to the world.
"John Key is one of the most outstanding national leaders in the world today. He has done an extraordinary job for New Zealand," he said.