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"We're delighted with the selection of Melissa Lee we think she is a top class candidate, she's already marked herself out as an MP that's going places and we are now going to put up the best contest we can in Mt Albert," Mr Key told reporters.
Ms Lee was selected last night for the June 13 by-election to fill the seat left vacant by former prime minister Helen Clark, who held it for 27 years.
Ms Lee thinks she can win the seat and will be helped by vote-splitting between Labour and the Greens.
"I'm very pleased (Greens co-leader) Russel Norman is standing...it means I potentially have a chance," she told Radio New Zealand.
Mr Key agreed.
"Our view is Russel Norman entering the race makes it a little more interesting, spices it up a wee bit, could well split the vote on the left," he said.
"In the end its going to be a difficult seat for National to win, it's a long-term (strong)hold for Labour but you know National has a very strong candidate and I think the Government is performing well."
Ms Lee said today Labour had held Mt Albert for 63 years and Miss Clark served it well, but there were four new candidates in the by-election.
"Mt Albert voters are spoilt for choice," she said.
"It will be fantastic to get into an electorate and represent the people there." Ms Lee was previously named as the 52nd most attractive woman politician in the world in an international survey.
"Recognition might be quite good...but the people in Mt Albert are talking about the economy, the crime rate and law and order," she said.
Ms Lee said last night law and order became one of her priorities after she was the victim of a home invasion six months ago, NewstalkZB reported.
"It was the most horrible experience and I think for six months I couldn't sleep, I had the lights on everywhere and every two minutes, I was walking around making sure the doors were locked and the windows were shut," she said.
Ms Lee is New Zealand's first Korean MP and is a former journalist and businesswoman.
Sixty party delegates, meeting at Mt Albert Bridge Club, took about an hour and 15 minutes last night to select her ahead of the only other nominee, Ravi Musuku, who stood for National in 2005 and last year.
For a new MP, Ms Lee has a relatively high profile having worked for 15 years as a TV presenter and producer on TVNZ Asia Dynamic and Asia Down Under.
Should she win, the next on National's list Cam Calder would enter Parliament.
He spent two weeks after the election as elected MP until special votes boosted Green Party numbers and saw him return to normal life.
Mr Calder is a qualified dentist and sports administrator who served on the global body governing the sport of petanque. He was also a president of the French NZ Business Council.
In last year's election Miss Clark held the seat with a 10,000-plus majority but the party vote difference of 2426 was tighter.
Mr Musuku was second with 9806 votes, 28.8 percent of those cast compared with Miss Clark's 59.2 percent.
Winning would increase National's majority in the house with partners ACT by one seat, but losing it would be blow for Labour leader Phil Goff who is new in the job.
Labour's candidate, David Shearer, previously worked as an advisor to Mr Goff when he was Foreign Minister.
The ACT Party has chosen list MP John Boscawen as its candidate.