Labour leader Jacinda Ardern, 37, becomes New Zealand Prime Minister

Wellington: Jacinda Ardern is New Zealand's newest prime minister. Labour will lead the next government in a coalition with NZ First.

The Greens are expected to back Labour on confidence and supply, giving the combined parties 63 seats, two more than the 61 majority they need.

Stepping into government brings the left out of the cold of opposition for the first time in nine years.

Ms Ardern, who only found out the news at the same time as the rest of the country, opened her first press conference as prime minister elect by acknowledging her predecessor in the role, National leader Bill English.

Labour leader Jacinda Ardern flanked by deputy leader Kelvin Davis (left) and Wellington Central MP Grant Robertson (right) during her announcement that Labour would form a government with NZ First.Credit: Kevin Stent

"I want to thank Bill English for the role he has played in this campaign but also as prime minister and as serving in the past as NZ's finance minister," she said.

"Mr English has already called me this evening and acknowledged that negotiations for the National Party have now concluded."

Labour will hold a caucus meeting on Friday morning to select a cabinet. Four places will go to NZ First MPs while they will also have a parliamentary undersecretary.

The Greens are expected to have proportional representation, but given that party is still finalising arrangements Ms Ardern would not go into detail about whether those roles would be inside cabinet or not.

New Zealand First leader Winston Peters.Credit: AP

New Zealand kingmaker Winston Peters has been offered the role of deputy prime minister, pushing aside Labour's deputy Kelvin Davis, but Ms Ardern said he was still considering whether to take up that offer.

The congratulatory calls have already started rolling in. Ms Ardern missed a call from Australia's opposition leader Bill Shorten, who along with former Labor prime minister Julia Gillard, had earlier congratulated Ms Ardern on Twitter.

Outgoing New Zealand Prime Minister Bill English.Credit: AP

In a statement Mr Shorten said Ms Ardern had brought "extraordinary energy to the Labour leadership and campaigned passionately for inclusive, progressive policies, founded on universal Labo(u)r values".

"In electing their third woman to serve as Prime Minister, New Zealanders have again provided an inspiration for women and girls around the world," he said.

"More than a century after the first Anzacs fought and fell together, Australia and New Zealand's friendship is stronger than ever. My team and I look forward to building and strengthening the connection between our two nations – and I trust the Government shares this commitment."

Mr Peters said he did not tell Ms Ardern what he had decided before making the announcement.

He met with his MPs ahead of the announcement. He then phoned his board to let them know about the decision and to get final sign-off, he said.

"We started negotiations the day after on October 8," Mr Peters said. "We believe that 11 days from start-to-finish is not too long to wait."

New Zealanders headed to the polls on September 23 in what was deemed the most volatile and hard-fought race in recent history. At stake was a change in openness to migration and trade and the central bank's approach to monetary policy.

Volatile opinion polls had shown a neck-and-neck race, but the ruling Mr English had led in opinion polls up until the day.

The selection of Ms Ardern as the Labour Party's leader on August 1 elevated a 37-year-old woman without the conservative set-up of a husband or children to the head of a national party, and NZ politics have not been the same since.

She is Labour's youngest leader ever, as at home on social media as she is in policy debates. She attracted global attention for condemning a television commentator's question about whether employers have a right to know whether a woman plans to become a parent.

A rising star in Labour since joining Parliament in 2008 as its youngest sitting member, Ardern is unconventional, accessible and ambitious.

Ms Ardern said she expected to make a trip to Australia as soon as possible, given Foreign Minister Julie Bishop's concerns around working with a Labour government. She's also anticipating attending the APEC Summit in Vietnam next month.

While Ms Ardern was not given the good news in advance Mr English was also not given a heads up of his defeat.

His wife Mary and sons Connor and Xavier - two of six siblings - were seen arriving ahead of the announcement to offer support.

Mr Peters said the decision was owed first to the New Zealand people.

"With respect the people of this country are the ones who deserve to know first," he said, through he conceded "that would be the nice thing to do".

NZ First made the decision based on how to best mitigate, not worsen, what New Zealand is expected to face in the coming years, Mr Peters said, adding Ms Ardern exhibited enormous talent on the campaign trail.

"We've always wanted to be in a coalition with one party, no more," he said.

"We believe capitalism must regain its human face. We had a choice for a modified status quo or for change."

Stuff.co.nz, agencies