Key Wins Second Term in N.Z. Poll Victory for National Party

By Chris Bourke and Tracy Withers

(Updates with comment from Goff in second paragraph.)

Nov. 26 (Bloomberg) -- New Zealand Prime Minister John Key won a second term in office with his National party on course to secure the most votes in more than 60 years in today’s election.

Phil Goff, leader of the main opposition Labour Party, conceded defeat shortly before 11 p.m. local time. “It wasn’t our time this time,” he said in a speech to his supporters in Auckland.

National won 48.1 percent of votes compared with 27.1 percent for Labour, according to preliminary results based on 98.8 percent of polling places counted, the Electoral Commission said on its website at 10:45 p.m. in Wellington.

Key, a 50-year-old multimillionaire and former foreign exchange head at Merrill Lynch & Co., will likely have to form a government with the support of smaller parties as he did in 2008. He faces the task of steering a recovery from New Zealand’s worst natural disaster in 80 years amid global economic turmoil and has pledged to sell state assets and overhaul welfare to erase a record NZ$18.4 billion ($13.6 billion) deficit.

Since winning office three years ago, Key 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.

‘Smell Fear’

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.”

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 down 2.9 percent this year compared with the MSCI Asia Pacific Index’s 21 percent drop.

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.

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.

Key will face some tough choices, Philip Borkin, an economist at Goldman Sachs New Zealand Ltd. in Auckland, said before today’s results.

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.”

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--Editors: Edward Johnson, Tracy Withers