New Zealand election: Jacinda Ardern becomes prime minister

Jacinda Ardern will become the country's third female prime minister, after New Zealand First leader Winston Peters threw his support behind Labour to form a coalition government and end nearly a decade of National rule.

It comes nearly a month after an inconclusive election result left both National and Labour courting his nationalist party to form a governing coalition.

"This is an exciting day. We aspire to be a government for all New Zealanders and one that will seize the opportunity to build a fairer, better New Zealand," Ms Ardern said.

Ms Ardern, 37, will become New Zealand's third female prime minister and its youngest leader since the 1800s.

She almost single-handedly brought Labour to government after taking over its leadership in August.

Before then, the election had been widely considered a slam-dunk for the incumbent National Party.

"We had a choice to make … for a modified status quo or for change," Mr Peters said in Wellington, ending nearly a month of political uncertainty.

"That's why in the end, we chose a coalition government of New Zealand First with the New Zealand Labour Party."

New Zealand First holds the balance of power with nine seats, a Labour-Green bloc controls 54 seats, and the National Party 56 seats.

Mr Peters has been offered the position of deputy prime minister, and Ms Ardern said Cabinet positions in her new government would be discussed on Friday.

"I feel extremely honoured and privileged to be in the position to form a government with Labour in the lead," Ms Ardern said.

Ms Ardern said she will visit Australia as soon as possible after being sworn in as prime minister — a trip anticipated to be awkward after some members of the New Zealand Labour Party were accused of "treacherous behaviour" by Foreign Minister Julie Bishop.

Two months ago Ms Bishop accused the New Zealand Labour Party of colluding with Australian Labor to dig up information on Barnaby Joyce's citizenship.

"Should there be a change of government, I would find it very hard to build trust with those involved in allegations designed to undermine the government of Australia," Ms Bishop said at the time.

But the Government is predicted to move quickly to rebuild the relationship, and Prime Minister Malcolm Turnbull has already spoken to Ms Ardern to affirm the importance of the NZ-Australia relationship.

"Look forward to seeing you soon and building our two nations' great partnership," Mr Turnbull tweeted.

Australia's Labor leader Bill Shorten has also congratulated Ms Ardern and described the win as a "new era" for New Zealand.

"Jacinda brought extraordinary energy to the Labour leadership and campaigned passionately for inclusive, progressive policies, founded on universal Labor values," Mr Shorten said.

During the campaign Ms Ardern said she wanted to build thousands of affordable homes to combat runaway house prices, spend more money on health care and education, and clean up polluted waterways.
Mr Peters said his party's negotiations were heavily influenced by changing the way capitalism was perceived in the country.

"Far too many New Zealanders have come to view today's capitalism not as their friend but as their foe, and they are not all wrong," he said.

Earlier in the day Mr Peters said making a decision had been "seriously difficult".

The NZ dollar fell more than 1.1 per cent over the day, drifting lower in the lead-up to the announcement and dropping after the announcement.

ABC NEWS AUSTRALIA