New Zealand Prime Minister Jacinda Ardern handed over the Labour leadership to Chris Hipkins in an emotional caucus meeting in Wellington on Sunday, as party MPs endorsed Mr Hipkins to become the country's next prime minister.

The pair — longtime friends and political allies — walked side by side through the halls of NZ's parliament house before the caucus vote on Sunday in a show of unity.

Mr Hipkins was the sole nominee from Labour's caucus to succeed Ms Ardern as leader after her bombshell announcement on Thursday that she was standing down due to exhaustion.

On entering the meeting, the pair embraced and were met with raucous applause.

The 64-member Labour caucus unanimously voted Mr Hipkins the new party leader, with the current education minister running uncontested for the role.

The vote was largely a formality, as party members rallied behind the 44-year-old after Ms Ardern's announcement to avoid a drawn-out leadership contest in the lead up to this year's New Zealand election. 

In a press conference held after the vote, Mr Hipkins said his government would focus on the "bread and butter" issues that low- and middle-income New Zealanders, as well as small business owners, faced. 

He said his government would be focused on helping families struggling "through these tough economic times", making note of inflation and housing affordability issues faced by New Zealanders. 

"You shouldn't have to be on a six-figure salary to buy a new house," he said.

He vowed to to re-focus the government's agenda ahead of a cabinet reshuffle, as well as pledging to strengthen the country's public services.

Mr Hipkins praised his "very good friend" Ms Ardern for her leadership, noting she was a particular inspiration for women and girls worldwide.

The caucus also voted for Labour MP Carmel Sepuloni as Mr Hipkins's incoming deputy on Sunday, who Mr Hipkins said would become the first Pasifika person to hold the position of deputy prime minister.