Powerful earthquake hits New Zealand's South Island

Two people have died, and thousands of residents along New Zealand's east coast fled their homes to head for higher ground as emergency services initially warned of a tsunami in some areas.

Stacked containers on angles at Centre Point, Wellington after a 7.5 earthquake around Cheviot in the South Island shook the capital Source: AAP

The quake struck just after midnight on Sunday local time.

Its epicentre was located 90 kilometres north east of Christchurch in the South Island, near Hanmer Springs, at a depth of 15 kilometres.

Emergency response teams were dispatched by helicopter with a swarm of aftershocks rattling the region.

New Zealand's Prime Minister John Key says the country's military helicopters have been deployed in affected areas but initial tsunami warnings have been downgrounded to coastal warnings.