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New Zealand stunned hot favourites Australia to capture their first World Cup crown with a 34-20 surprise victory in the final at Lang Park.

The Kiwis claimed a spirited win on the back of a controversial penalty try ruling with 10 minutes remaining to put them eight points ahead at a crucial stage of the tournament decider in front of 50,599 fans.

With New Zealand clinging to a 22-20 lead and the clock ticking down, Australian winger Joel Monaghan tackled Lance Hohaia without the ball, preventing what appeared to be a certain touch down, giving the video referee no choice but to award the penalty try.

Standoff Benji Marshall kicked the conversion to make the game safe for the Kiwis at 28-20.

The committed Kiwis rubbed further salt into Australia's wounds when prop Adam Blair crossed with four minutes to go, silencing the capacity home crowd who had come to the ground expecting an easy Australian win.

Australia had strolled through the tournament, racking up 180 points to 16, starting with a 30-6 thrashing of the New Zealanders and were undoubted favourites to capture their 10th World Cup.

The Kangaroos looked set for another big-scoring night when they powered to a 10-0 lead after 17 minutes and had another try by skipper Darren Lockyer disallowed by the video referee.

But the New Zealanders were far more committed than their Australian opponents and dominated for much of the match.

They trailed 12-16 at halftime but came out much stronger in the second period and thoroughly deserved their win.

The tone of the final was set from the outset when the Australian team advanced on the New Zealanders during the haka with the two teams menacingly eye-balling each other during the traditional Maori challenge.

The Kiwis had the better of the opening stages but were unable to convert pressure into points.

They defended well, but could do nothing when Australian fullback Billy Slater broke the line 35 metres out and sprinted for the corner, unloading to captain Darren Lockyer, who crossed untouched for a 4-0 lead.

Five minutes later Slater timed a perfect pass to winger David Williams, who raced away from halfway to score next to the posts. Johnathan Thurston converted for a 10-0 lead.

Lockyer then had the chance to put the game beyond the Kiwis' reach but dropped the ball over the line chasing a kick ahead with a certain try going begging.

The let-off seemed to inspire the New Zealanders and they came storming back.

With 15 minutes left in the half, loose-forward Jeremy Smith crashed over under the crossbar for a converted try.

The New Zealanders took an unlikely lead moments later when centre Jerome Ropati scored near the uprights after Marshall had appeared to knock the ball on -- the video referee ruling the ball had been knocked out of his hands by an Australian player.

Issac Luke's conversion made it 12-10 to the underdogs.

The Australians were stung into action and attacked furiously, spurred on by a masterful performance from Lockyer, who put the home side back in front when he crossed for 16-12 halftime lead.

New Zealand's early second half pressure told when fullback Lance Hohaia darted over for a converted try and an 18-12 lead.

Then came a moment of madness from Slater as he fielded a kick near his own tryline and realising he was about to be bundled into touch threw the ball blindly infield, gifting a try for Marshall and a six-point lead with 18 minutes left.

The Australians came back again, Lockyer throwing a long cut-out pass to centre Greg Inglis to cross over in the corner to reduce the Kiwis' lead to two.

But the Kangaroos' hopes crashed with Monaghan's instinctive tackle on Hohaia to effectively end the contest.

AFP