WELLINGTON (Reuters) - New Zealand Prime Minister John Key, who won praise for his economic stewardship after the global financial crisis, unexpectedly announced his resignation on Monday after eight years in power, backing his finance minister to take the helm.
Bill English, deputy prime minister and finance minister, said he would likely decide overnight whether to stand for the leadership of the ruling centre-right National Party at a special December 12 caucus meeting.
Key, a popular former foreign exchange dealer who grew up in state housing, is part-way through a third, three-year term that has been marked by political stability and economic reform.
He told reporters he would stay in parliament long enough for his party to avoid a by-election for his seat. National elections are not expected until late 2017.
"It leaves the Cabinet and caucus plenty of time to settle in with a new Prime Minister before heading into election year with a proud record of strong economic management," Key told reporters in Wellington.
"I am hugely confident that National can and will win the next election."
Key said he would vote for English if he stood for party leader and prime minister at the December 12 caucus meeting.
"I'll be talking to caucus and family today and tonight," English told reporters. "I wouldn't stand if there wasn't strong caucus support for me standing."
English, a political veteran who previously worked on the family farm and as a Treasury Department policy analyst, would likely continue with many of Key's core policies, analysts said.
Steven Joyce, who has held a variety of senior cabinet positions since joining the parliament in 2008, is seen as another potential candidate, while Judith Collins, the minister for police and corrections, told local media she would not rule out running.
"We expect New Zealand's very strong institutions to lead to a smooth transition and policy continuity," ratings agency Moody's said in a statement, adding there were no implications for New Zealand's Aaa credit rating.
The New Zealand dollar fell around a fifth of a U.S. cent on the news and was last trading around $0.71.
"One issue to be mindful of is that we've had political stability in New Zealand now for a number of years," said Philip Borkin, a senior economist at ANZ. "That may not change significantly but it does add a little bit of uncertainty to the political environment that we're used to."
Key, a multi-millionaire who worked at banks including Merrill Lynch, won office for the Nationals in 2008, ending the nine-year rule of Labour’s Helen Clark. English briefly served as leader of the National Party previously, trying and failing to unseat Clark in 2002.
Together Key and English won praise for their stewardship of the NZ$240 billion ($170 billion) economy in the aftermath of the global financial crisis and two devastating earthquakes near Christchurch.
In October, New Zealand reported its second straight budget surplus, helped by an economy growing at 3.6 percent in the second quarter.
Key steps down with his party in a dominant position in New Zealand's German-style mixed member proportional representation parliament.
A Roy Morgan poll last week showed support for the National Party up 1.5 percent to 49.5 percent, clearly ahead of the Labour/Greens alliance, at 37.5 percent support.
"I sent him one very short message 'Say it ain't so bro'," Australian Prime Minister Malcolm Turnbull told reporters in Melbourne.
"John Key is one of the most outstanding national leaders in the world today...He is somebody that all of us, right around the world, leaders in countries large and small, draw inspiration from."
Key has been dubbed "Teflon John" for avoiding lasting damage from a series of controversies which include repeatedly pulling the ponytail of a waitress, his handling of the arrest of accused internet piracy kingpin Kim Dotcom and his backing of a failed referendum to change the New Zealand flag.
"As a top trader he knows you sell stocks when they are at their highs, not lows," Bryce Edwards, lecturer in politics at the University of Otago, told Reuters. "So he's managed to leave politics on a high note and will go down in history as a popular politician."
Asked if he had any regrets, Key said that not securing the Trans Pacific Partnership trade deal was a major one, but it was time to call it quits for his wife Bronagh.
"Ten years at the top is a long time, it is a lot of lonely nights for Bronagh. I really feel I owe it to family to come home."
($1 = 1.4112 New Zealand dollars)
Additional reporting by Jane Wardell, Colin Packham and Jonathan Barrett; Writing by Lincoln Feast; Editing by Paul Tait and Michael Perry