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Chris Trotter, of Auckland, said the party was left in a very difficult position losing its star attraction, and MPs were likely to endorse Mr Key's anointed successor, Bill English.
Economic Development Minister Steven Joyce is expected to take the finance minister role.
``English and Joyce are his chosen successors for prime minister and finance minister.
``He is [effectively] forcing Judith Collins and Paula Bennett into the role of rebel pretenders to the throne. His team will be able to say: `The country's in shock; what we need now is a smooth transition'.''
Yesterday, UMR Research released polling data from September-October that shows Mr English appears to be the public's favoured option, on 21%, followed by Mr Joyce, 16%, Ms Bennett, 11% and Ms Collins, 6%. UMR Research had given people those four options, framed with the scenario that Mr Key was no longer standing.
Despite Mr Key's public endorsement, Mr English did not confirm he was running, but he did not rule it out yesterday.
Mr Trotter said Ms Collins had an outside chance at winning the leadership.
``She would be to National what David Cunliffe was to Labour. There'll be those of a certain ideological persuasion who will love her to bits.
``Collins is a person with too much baggage and too divisive. And Paula Bennett just doesn't have the gravitas.''
Mr English was a steady pair of hands, and his ``laconic Southlander shtick'' had some appeal.
But he carried the baggage of the 2002 election result when he led his party to a historic defeat.
The struggling Labour Party still faced an uphill battle in next year's general election.
``They will still have to up their game considerably, but boy, their chances of winning are a whole lot greater now than they were 24 hours ago,'' Mr Trotter said.
Council of Trade Unions secretary Sam Huggard, of Wellington, said unions wanted a National Party leader who was more willing to share economic gains with workers.
There had been a ``slight change of tack'' from the Government in the past 18 months.
``A couple of areas where the union movement has worked quite constructively with National is outlawing zero-hours contracts, and also the historic changes signalled for equal pay as a result of the Kristine Bartlett case.''
Those decisions were made by Cabinet, not Mr Key alone, Mr Huggard said.
``When we meet with the incoming new National leader we'd want to talk about what their agenda is to lift living standards for all, not just for some.
New Zealand First leader Winston Peters went on the attack after the announcement, saying Mr Key was getting out of the top job before economic problems became apparent.
``The fact is that the economy is not in the healthy state that the Prime Minister has for so long claimed, and there are other issues which have caused this decision as well.
``The New Zealand public should have been informed of this a long time ago.
``Clearly the Prime Minister does not believe the superficial polls any longer,'' Mr Peters said.
Labour Party leader Andrew Little said Mr Key served ``generously and with dedication''.
``The Prime Minister has served New Zealand through times of considerable global instability, and will leave politics proud of his achievements. I wish him and his family the best for the future.''
The Green Party also extended its best wishes to Mr Key.
``On behalf of Metiria, the Green Party MPs and the party, I would like to thank John Key for his eight years of service as Prime Minister,'' Green Party co-leader James Shaw said.
Westpac acting chief economist Michael Gordon said no major change in policy was expected ahead of the general election.
``The Government will release its half-year economic and fiscal update on Thursday, which is expected to show increases in projected fiscal surpluses.
``The economic policies of both of New Zealand's main political parties are relatively centrist.''