New Zealand Begins Vote Counting as Key Poised for Second Term in Office

By Chris Bourke and Tracy Withers - Nov 26, 2011 3:43 PM GMT+0700

New Zealand Prime Minister John Key’s National party is leading the main opposition with more than three-quarters of polling places counted in today’s election as the government seeks a second term in office.

National won 48.8 percent of votes compared with 26.4 percent for the Labour Party, according to preliminary results based on 77 percent of polling places counted, the Electoral Commission said on its website at 9:40 p.m. in Wellington. Results from all booths are likely to be known by 11:30 p.m.

“We can safely say we will be the largest party, but in terms of how it ends up we’ve still got some votes to get through,” Transport Minister Steven Joyce said on Television New Zealand.

Key, a 50-year-old multimillionaire and former foreign exchange head at Merrill Lynch & Co., is seeking to become the first party leader to capture more than half the votes cast in a New Zealand election since 1951. Since winning office in 2008, he has managed the economy through a global financial crisis and a Feb. 22 earthquake that devastated the business district in Christchurch, the nation’s second-largest city, killing 181 people.

National has pledged to sell state assets and overhaul welfare to eliminate a fiscal shortfall, while Labour plans to raise taxes on capital gains and high income earners to erase a record NZ$18.4 billion ($13.6 billion) deficit.

The prime minister has had “considerable challenges thrown at him domestically as well as offshore and he still seems to have the air of competence and being in control,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities. “People in the financial markets can smell fear and he hasn’t expressed any.”

Opinion Polls

Key’s National party held an average 24-point lead over opposition leader Phil Goff’s Labour in five opinion polls published in the past week. In the last election, National won 58 seats in the 123-seat parliament and assembled a government with support from the ACT party, the Maori party and the one- seat United Future party.

New Zealand lost its top credit grades at Standard & Poor’s and Fitch Ratings in September, with both citing concern that government and household debt was too high. Still, New Zealand stocks have outperformed in the region, with the NZX 50 Index (NZSE50FG) down 2.9 percent this year compared with the MSCI Asia Pacific Index (MXAP)’s 21 percent drop.

Voting System

The New Zealand dollar peaked at a record high in August, above 88 cents against the U.S. dollar. It traded at 74.05 cents in late New York trading yesterday.

Under the nation’s so-called mixed member proportional system, Key will have to form a coalition again if he doesn’t win more than 50 percent of the vote. Goff, 58, could form a government by cobbling together a coalition with support from other parties if Key’s likely allies don’t win enough votes to stay in parliament.

In a non-binding referendum alongside today’s election, voters are being asked to retain or change the voting system.

New Zealanders cast two ballots, one for a party and the other for a candidate in their constituency. Parties need to garner five percent of the vote or win a constituency to get into parliament.

The Christchurch earthquake and a temblor in September last year that didn’t cause any fatalities damped consumer spending, and New Zealand faces a NZ$20 billion reconstruction bill.

While the Treasury Department forecasts annual average growth of 2.3 percent in the year ending in March, the central bank has said the country may not be immune to a worsening of the European debt crisis.

If Key wins he will face some tough choices, said Philip Borkin, an economist at Goldman Sachs New Zealand Ltd. in Auckland.

The global economic outlook means surpluses “will be a difficult task to achieve,” Borkin said. The situation will require “some potentially difficult and unpopular decisions to be made.”

To contact the reporters on this story: Chris Bourke in Wellington at cbourke4@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.

To contact the editor responsible for this story: Chris Bourke in Wellington at cbourke4@bloomberg.net