UPDATE 1-New Zealand PM Ardern sets Sept 19 as election date

(Adds details on election issues, quotes from Ardern)

WELLINGTON, Jan 28 (Reuters) - New Zealand Prime Minister Jacinda Ardern on Tuesday called an election for September 19, a contest that will test her popularity which soared after her response to a terror attack last year but has since taken a hit due to economic issues.

Ardern's centre-left Labour Party-led coalition came to power in 2017, and is seeking a second term. An election had to take place by the coming November.

I will be asking New Zealanders to continue to support my leadership and the current direction of the government, which is grounded in stability, a strong economy and progress on the long term challenges facing New Zealand, Ardern told a media conference.

Ardern's 2017 campaign focusing on positive messaging and connecting directly with voters unexpectedly brought her coalition to power.

The 39-year-old leader has since won praise globally for her views on issues such as womens rights, climate change and diversity. She was widely commended for swiftly tightening gun laws following a mass shooting in two Christchurch mosques last year.

She said last week that her party would wage a "relentlessly positive" 2020 election campaign again, announcing her party had signed up to Facebook's advertising transparency tool to fight misinformation.

But her government has grappled with issues including housing, urban poverty, immigration, jobs and economic growth, which are all expected to be key election topics.

Two opinion polls in October showed support for her ruling coalition at its lowest since 2017, and her own sky-high popularity waning.

The government announced infrastructure projects worth NZ$12 billion ($7.90 billion) last month, boosting capital spending to its highest in 20 years, as it seeks to fire up the economy.

"We will be asking for a further term to get the job done," Ardern told the news conference.

In addition to electing the next government, New Zealanders will also take part in a double referendum at the 2020 polls, as they vote on whether to legalise recreational cannabis and euthanasia.

The parliament will be officially dissolved on August 12 and until then the government will function as usual, Ardern said. (Reporting by Praveen Menon; Editing by Muralikumar Anantharaman and Lincoln Feast.)