Outgoing New Zealand Prime Minister Helen Clark has stepped down as Labour Party leader following her defeat in yesterday's general election.

The new government will be a conservative coalition led by the National Party.

The National Party ended up with 45 per cent of the votes compared to Labour's 33 per cent, and its leader, John Key, expects to finalise arrangements for a coalition with two, possibly three, of the minor parties in the next few days.

"New Zealanders have voted for a safer, more prosperous and more ambitious New Zealand," he said.

"They voted for hope, they voted for action and they voted for results."

Prime Minister Helen Clark says the deteriorating global economic situation meant New Zealanders faced significant challenges no matter who they elected.

She is standing down as Labour leader but staying on in Parliament for the time being.

The conservatives have swept back to power in New Zealand with a decisive victory in the general election.

Miss Clark says she accepts responsibility for the defeat and is standing down as the Labour Party's leader.

She says there is much to be proud about Labour's last nine years in government.

"I do hope that all that we've worked to put in place doesn't go up in flames on a bonfire created by the right wing of politics," she said.

She told supporters that her time as the head of New Zealand's government was not wasted.

"I'll be looking back on these last nine years with an incredible amount of pride, pride in years of economic growth, years of higher employment, years of of huge advances in public health and education," she said.

'Gutsy' Clark

On ABC1's Insiders program, Foreign Affairs Minister Stephen Smith congratulated Mr Keys on his election victory.

"We value very much our relationship with NZ, it's a very important [one]," he said.

"We worked very closely with Helen Clark's government... so we expect that very close cooperation and working together to continue [with Mr Keys]."

Mr Smith says that in the end, time caught up with the "gutsy" Miss Clark.

"I think she's held in very high regard and very high respect," he said.

"She's been a fighter in good times and bad times, and I think it's that that's earned her respect."

Mr Smith says Miss Clark also worked on sucessfully rebuilding New Zealand's relationship with the United States.