With nearly 100% of the votes counted, PM John Key's party held 48%, with the opposition Labour Party lagging behind on 25%. The Greens had 10%.

Mr Key has recently been forced to defend his party against claims of dirty politics and mass spying.  But he has now won his third term in office, with Labour leader David Cunliffe admitting defeat.

"I have called John Key and congratulated him and acknowledged he will continue to be prime minister of New Zealand," Mr Cunliffe was quoted as saying by the AFP news agency.

Meanwhile, Mr Key said: "I'm ecstatic, it's a great night."

Nearly 3.5 million people were eligible to cast their vote.

Under New Zealand's proportional representation electoral system, a coalition government is more likely than any one party winning a majority.  But the results suggest Mr Key might be able to govern alone, without the support of the populist New Zealand First party.

The National Party is projected to win 61 seats in the 120-member parliament, according to the national electoral commission.

Labour looks set to secure 32 seats.(KH)