Prime Minister John Key this afternoon said Pansy Wong was "paying a very heavy price" for wrongly claiming a Parliamentary travel perk on a 2008 trip to China.

Earlier today Mrs Wong announced she was stepping down as a Cabinet minister because her use of her travel perk did not appear to be within Parliament's rules on a 2008 trip to China.

The perk - giving heavily discounted air fares - is to be used only for private travel and is not to be used for business trips.

Speaking from Japan where he is attending the Apec summit, Mr Key said Mrs Wong had made the right decision to step down.

"She is resigning as a minister, she has worked hard to be a minister and in her time as minister she's done a very good job."

However he said she had failed to exercise the proper oversight of her husband's use of the travel discount and had to accept responsibility for that including paying back any travel costs which were wrongly paid by the taxpayer.

Parliamentary Services is now examining other uses of the rebates by the Wongs to ensure they were appropriate.

"It will be thousands of dollars - he's gone to Beijing - we know there will be one example but we can't rule out other examples. We're not sure if this is an isolated incident, but we do know she'll have to repay that."

The travel rebates can only be used for leisure or Parliamentary business - not for private business. Mr Key said while the majority of her husband's travel on that trip was leisure, he had conducted business while on it which was a breach of the long-standing rules.

"At the end of the day she has to take responsibility for the fact her spouse was using her travel discount by virtue of her tenure in parliament, and on that basis she failed to exercise her responsibilities properly. She offered her resignation to me and I though it was appropriate that I accepted that resignation."

He said it was unlikely Ms Wong would resign from Parliament altogether.

"In my view she's shown an error of judgement and for someone who's been a good minister and has had 14 years in Parliament it's very disappointing."

He said Georgina te Heuheu would become the acting minister for her Ethnic Affairs and Women's Affairs portfolios.

Pansy Wong steps down

In a statement issued this afternoon, Mrs Wong said the 2008 trip was a holiday but "my husband did conduct some business".

"Further, I am not able at this point to give the Prime Minister an assurance that this is a one-off situation.

"As a Member of Parliament it is my responsibility to ensure that the travel entitlement is used within the rules and that does not appear to be the case on this occasion."

Click here for the full statement.

Mrs Wong, who was born in China and raised in Hong Kong, said it was a dream come true to become New Zealand's first Asian MP and that the job came with big responsibilities.

"That dream can only be kept alive by living up to the high standard set by the prime minister and myself. Therefore I have given my resignation as a Cabinet minister to the prime minister."

Speaker orders investigation into allegations

Speaker Lockwood Smith has confirmed that Mrs Wong has asked him to investigate her travel for any breaches of the Parliamentary travel perk.

"I have, therefore, asked the General Manager of the Parliamentary Service to undertake urgently a full investigation of Mr and Mrs Wong's use of the international travel rebate," Mr Smith said.

Mrs Wong said she would make a full refund if any of her or her husband's travel was found to be outside the rules.

Ministerial behaviour standards have dropped - Hodgson

The issue of the couple's travel came to light this week when Labour's Pete Hodgson accused Mrs Wong of breaching the Cabinet manual in the way she signed herself when witnessing a deal of her husband's during the trip to China.

She described herself as a "Minister of the NZ Government" in the blank space where it asked her to state her occupation, and she gave her address as Parliament.

Mr Hodgson said she should have stated MP.

Today, he said repeated denials and personal attacks from the Prime Minister, his senior MPs and his staff on the opposition and media this week were "clearly just a cynical attempt to deflect questions and cover up the truth - that the Minister had been caught out misusing the taxpayer-funded travel perk".

Asked whether he believed Mr Key's Government was starting to look a little shabby, he said he did.

"Standards around ministerial behaviour have in my view dropped. I do think there is a slide in standards and accountability is on the wane."

Mr Hodgson said he believed there was more to the affair and Speaker Lockwood Smith's investigation would be helpful, "there are other linkages with these hovercraft companies".

Mrs Wong is the third minister in Mr Key's Government to resign.

Last year Richard Worth resigned last both as a minister and an MP after it was revealed he was under police investigation following a serious sexual allegation by a Korean businesswoman.

Housing minister Phil Heatley resigned early this year over revelations of misuse of his credit card and a $70 wine purchase at a National Party conference signed off as "dinner".

Mr Heatley was later reinstated after an Auditor General's report cleared him of any deliberate wrongdoing.

- with NZ Herald staff and NZPA