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Mr Key planned to discuss a new flag with senior ministers and possibly put it to a referendum as part of this year's election.
He said that finding a consensus on a new flag would be difficult and if ministers backed a change, the Government would decide on a design and ask the public to vote for or against it.
"We have to make it simple," he said yesterday.
The flag could be changed by legislation, but Mr Key said it was a constitutional issue and required consultation.
He publicly backed replacing the flag with a silver fern in 2010.
At the time, the Herald ran a campaign to change the flag and found more than half of the members of the Order of New Zealand supported a change.
Asked whether a flag debate could overshadow the Government's messages about more important issues such as the economy, Mr Key said: "That's always a risk and that's one of the things we would have to consider."
The proposal was backed by most political parties yesterday.
Labour Party deputy leader David Parker said it was not an important issue, but he supported a change to a red, white and blue design by an unnamed Dunedin designer which incorporated Maori and colonial influences.
United Future leader Peter Dunne said the present flag "smacks of British imperialism" and recommended the Union Jack be removed.
Mana Party leader Hone Harawira, who negotiated with the Government to get a Maori flag flown from the Auckland Harbour Bridge on Waitangi Day, said it was "time for for us to grow up and move on".
He flew the Tino Rangitiratanga flag on his car but said any flag would be an improvement on the Union Jack and Southern Cross.
The present flag dates from 1865, when the British Government asked vessels in its colonies to fly flags with the Blue Ensign. In 1869, Governor Sir George Bowen directed that the Southern Cross be added, as the constellation could be seen only in the Southern Hemisphere.
The present design was adopted as the national flag in 1902.
Yesterday, there were questions about the timing of any change and the design of a new flag.
New Zealand First leader Winston Peters said an alternative could not be found within eight months, and Greens co-leader Russel Norman said he supported a change, but the design should not be left to the Cabinet.
Act Party leader John Banks opposed any change, saying New Zealand soldiers had fought and died under the flag in many campaigns.
A Herald on Sunday poll found that 42 per cent of those surveyed preferred the current flag and 39 per cent favoured the silver fern.