Former New Zealand Prime Minister John Key is set to be given Australia’s highest honour when he is appointed an Honorary Companion in the Order of Australia.

Mr Key has been knighted as part of the Queen's Birthday honours.

Prime Minister Malcolm Turnbull made the announcement in a statement, saying he welcomed the Governor-General Sir Peter Cosgrove’s approval of his recommendation.

Mr Key will be bestowed the honour at a ceremony in Canberra on Tuesday.

Mr Turnbull described Mr Key as an “outstanding leader” and praised his work on advancing trade and other matters.

“My instant, dismayed, reaction on his retirement last year was “Say it ain’t so Bro” - he has been a great friend of Australia and has represented his nation, and our shared values, magnificently,” the Prime Minister said.

“Lucy and I look forward to seeing more of John and Bronagh this side of the ditch and perhaps John and I can venture out for another paddle before too long.”

Mr Key resigned from the job late last year after eight years as prime minister, saying it was the “hardest decision” he’d ever made.

Earlier this year, he was given the formal title of Knight Grand Companion of the New Zealand Order of Merit as part of the Queen's Birthday honours.