David Shearer with his family while working for the UN in Iraq.

David Shearer announces his leadership of the Labour party in 2011.

David Shearer shows off a congratulatory text after winning the Mount Albert seat in 2009.

Oh the irony. David Shearer brandishes two dead fish in Parliament this week.

Former Labour leader hopeful David Cunliffe says he is considering another tilt at the party leadership, following David Shearer's departure.

But the MP said he wants to see whether he has the support from his caucus and party first.

Shearer stepped aside this afternoon, saying he didn't think he had support of his full caucus.

1 of 6 ANDY JACKSON/ Fairfax NZ CONTENDER: Deputy leader Grant Robertson is smart and a hard worker, but do the wider public know him? 2 of 6 FIONA GOODALL/ Fairfax NZ CONTENDER: Revenue spokesman David Cunliffe is not as popular in the caucus as he is outside. 3 of 6 JOHN HAWKINS/ Fairfax NZ CONTENDER: Finance spokesperson David Parker has ruled himself out, but is considered a solid pair of hands. 4 of 6 JASON OXENHAM/ Fairfax NZ CONTENDER: Foreign Affairs and Trade spokesman Phil Goff has supposedly ruled himself out, but will he have another tilt? 5 of 6 CAMERON BURNELL/ Fairfax NZ CONTENDER: Justice spokesman Andrew Little has the gold standard left-wing credentials, but will he appeal to enough voters? 6 of 6 MARCUS WILD/ Fairfax NZ CONTENDER: Maori Affairs spokesman Shane Jones has the charisma but has blotted his copy book with some past deeds.

His resignation would be effective once a new leader was elected, which would happen in three to four weeks.

Wellington Central MP Grant Robertson said he was the acting leader while remaining deputy leader.

Cunliffe, who effectively challenged Shearer's leadership but lost a caucus vote unanimously in November, also claimed he had no idea Shearer planned to resign until he announced his decision to the caucus this morning.

ROBERT CHARLES David Shearer

Cunliffe was demoted as a result of the failed bid but confirmed today he was considering another leadership attempt.

"I am going to be taking the next few days to consult with my family, with colleagues and with party supporters and I won't be making a decision until after I have done that."

Cunliffe said no vote of confidence in Shearer was held, and he reiterated it had come as a surprise.

"I don't know who has spoken to him but the first that I knew was when he made his statement to the caucus."

Shearer had come to a decision which he believed was "in the best interests of the New Zealand Labour Party," Cunliffe said.

This afternoon iPredict, the prediction website which allows traders to take bets on economic and political events, said there was a 69 per cent chance that David Cunliffe would be the next leader of the party.

Bryce Edwards, a political commentator who lectures at the University of Otago, tweeted that the "new Labour leadership will be Cunliffe (leader) and Robertson (deputy) - I understand it's predetermined."

Cunliffe is widely believed to have the backing of Labour grassroots, while Robertson is likely to have significant support in the caucus.

Robertson said he would talk to colleagues and party members before making a decision on whether to stand to replace Shearer.

''I'm not ruling it out and I'm not ruling it in."

Robertson said he had been Shearer's ''loyal deputy'' and had tried to support him for the past 20 months.

''Everybody in the caucus, as everybody in the wider Labour Party, would like to see us doing better in the polls and David's obviously reflected on that. He made his own decision today and I respect that.''

Robertson said he first learned of Shearer's decision mid-morning today. Under Labour's rules, there would be a run-off for the leadership with the party having 40 per cent of the vote, the caucus having 40 per cent, and affiliates, including unions, 20 per cent.

Another possible contender was front bench MP Shane Jones, who was on a trajectory toward the leadership before blotting his copy book for running up blue movie bills on his ministerial credit card.

David Parker ruled himself out of the running. He was part of a three-way battle for the leadership in late 2011, but said he was not going to stand again.

He refused to comment on whether he was surprised by Shearer's decision, or who would be a good leader.

"I'm sure he did it with sadness and we accepted his resignation with sadness, but support him in the decision.''

Labour List MP Andrew Little said he hadn't decided whether or not to put his name forward for the leadership.

"I haven't given it any thought at this stage," he said.

SWIFT CHANGE NEEDED

Labour MP Lianne Dalziel would not comment on who she thought would be the next leader, but believed the party would unite behind someone quickly, doing a deal rather than enduring a contested and potentially bloody leadership process.

"There are a lot of people who would like to see the matter resolved quickly, very quickly. The idea of uniting behind a new leadership team would be seen as very positive."

The Christchurch mayoral candidate had received a number of messages from people in the party who wanted to see the issue resolved.

Dalziel said Shearer's decision was courageous as he had put the party's fortunes before his own ambition.

"But this whole time that I've known David Shearer I've known him to be a man of courage so it doesn't surprise me, but it's sad on a whole lot of levels as well because he obviously put himself forward for the leadership believing that he could lead us to that place and he's now of the view that that is not the case."

Canterbury Labour list MP Clayton Cosgrove, who served on David Shearer's front bench, said the former leader was rare for putting the cause ahead of his own interests.

"The guy is the full quid," Cosgrove said.

"He has spent a life in public service and being the leader of the Opposition is a bit different from being mortared in the Middle East but it comes with its own difficulties.

"It's a tough job, the toughest job in Parliament. But he's given it his best shot, he worked his guts out and I was proud to serve in his front bench.

"The old saying, you come into politics for what you can do, not what you can be, and I think he's been one of the guys who has lived by that."

'UNDERMINED'

Prime Minister John Key said he thought Shearer was "a decent man", but he did not have control of his caucus and had been undermined from the start of his leadership by Robertson, "who will be rubbing his hands with glee".

"There are times [Shearer] was set up by his deputy ... [Robertson] spent the last 20 months undermining his leader."

Shearer was a decent bloke, but lacked the full support of his team, Key said.

The Government took every leader of the Opposition seriously, but he did not believe Labour could heal its wounds and divisions and present a viable alternative government, he said.

"David Shearer was a decent man leading a very divided Labour Party," he said.

He said he was disappointed he had not reached an agreement with Shearer over the GCSB legislation, passed into law yesterday.

He blamed Robertson for the failure.

"He [Shearer] listened to Grant Robertson. In his heart of hearts from what I could see from David Shearer, he actually wanted to vote for the legislation."

'TOO NICE'

Reaction to Shearer's resignation has ranged widely among MPs.

Maori Party co-leader Te Ururoa Flavell praised Shearer as a person and said he was "shocked", but his downfall was inevitable because opinion had moved against him.

Mana Party leader Hone Harawira said Shearer was too nice.

"I always found him to be very friendly, very open and that's probably his downfall. Nice guys don't last long in this game," he said.

Justice Minister Judith Collins said it was obvious Shearer did not enjoy the support of his caucus. He was obviously not up to the leadership, which was a "tough job".

"I think the fish thing [a reference to Shearer producing two dead snapper in the House on Tuesday] was the last straw, frankly," Collins said.

She did not expect to see a stronger Labour emerge under new leadership.

"No, not from what I'm looking at over there."

Social Development Minister Paula Bennett said Shearer had not impressed as Labour leader although it was a shame to see a career end in such a way.

"I found him to be quite ineffective but that's easy for me to say from this side of the House," Bennett said, adding it was not that Shearer was too nice, "but I don't think he really ever hit his stride".

"You've either got it or you haven't and he proved not to."

She would not guess at who would be the next leader, but said: "I don't think it's Cunliffe."

Green Party co-leader Metiria Turei said she and Russel Norman had enjoyed working with Shearer, and it was a matter for the Labour Party to select its new leader.

She was surprised by the timing of his resignation.

"I think it's very brave that David has resigned, rather than being removed," she said.

Turei had no information about what was behind the departure and had no view on who should be the replacement.

"I hope that it leads to a strong Labour Party who are as committed as we are to removing this Government," she said.

SUPPORT LACKING

Shearer told reporters this afternoon it had been a privilege to lead the party for the past 20 months.

"But we do need to do more," he said.

"So the time has come for me to hand over to a new leader who can take Labour through to 2014.

"We need to do more and we haven't had the lift (we want). To really take the country forward we need a Labour government.

"The ambitions of one person should never be larger than that greater purpose."

Whoever became leader would have his full support, he said.

Shearer said there was no letter of ultimatum on his leadership, and no vote.

"But from the soundings I have taken from colleagues I realise I no longer enjoy the confidence of a number of my caucus colleagues," he said.

RUMBLINGS

The first rumblings that something might be afoot came yesterday when Jones was apparently asked about Shearer's "dead snapper" stunt which backfired on him this week.

Jones reportedly told Maori TV that when the rot started, it began at the top - an apparent reference to the rot in Labour starting with Shearer.

Shearer has been dogged by bad polls. His resignation comes just a day after a Fairfax Media-Ipsos poll which showed Labour had got no traction on big ticket policies or dented National's support despite controversies such as the GCSB bill.

The poll put Labour on 31.6 per cent compared with National's 48.3 per cent.

But the big concern for Labour would have been the four-point drop since the start of the year.

Shearer was chosen as Labour leader in December 2011, in a two-man contest with David Cunliffe.

He took over from Phil Goff, who resigned following election defeat to National.

Shearer had entered Parliament in 2009, after Helen Clark quit to take up the top job at the United Nations, winning the Mt Albert by-election with a majority of 9718.