Prime Minister John Key has floated the idea of a powerful new agency to oversee major building projects.

The idea of an urban development authority was proposed by the Productivity Commission last year. It said the authority could assemble sites, master-plan large residential developments and partber with private sector groups to deliver them.

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Key said similar authorities were having a big impact overseas.

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They had been used "quite successfully" in Australia and elsewhere.

"At this stage, that thinking is in its infancy, but we're continuing to look at what the options may be."