National, led by former foreign exchange dealer John Key, was sitting on 49 percent share of the vote, which would translate into 61 seats in the 121 seat parliament from its current 58, with around two-thirds of the votes counted.
“We obviously are happy with the numbers we have got but again very cautious about the total count so far and I think we all should be,” National’s campaign manager Steven Joyce said on TVNZ.
Key campaigned on promises to build on policies of the past three years with an emphasis on sparking economic growth by cutting debt, curbing spending, selling state assets and returning to a budget surplus by 2014/15.
The Labour Party’s share of the vote was around 26 percent, which would see it win 32 seats, down 11 on its current stake.
“We’re obviously hoping we’ll come up from where we are as the bigger booths come in,” said senior Labour MP David Parker.
Under New Zealand’s proportional voting system, parties must secure either a local electorate seat, or 5 percent of the nationwide vote to get into parliament.
The pattern of past elections would suggest the margin will narrow as votes in bigger cities are counted. The urban vote has in the past bolstered Labour’s share.
Opinion polls published in the last day of the campaign put the National Party as many as 25 percentage points ahead of Labour.
The affable Key has been one of the most popular leaders in New Zealand history and has been seen as a safe pair of hands as he led the country through earthquakes, a coal mine disaster, and the global economic turmoil.
He has also benefited from closely linking himself with film maker Peter Jackson, who is making two movies based on the Hobbit books, and the country’s All Black rugby team, which won the Rugby World Cup on home soil last month.
“But Kiwis also go on personality,” said John Parenga, 20, a cafe worker, who cast an advance vote for National.
Key, who voted at a school near his Auckland home, ordered in a large number of pizzas as he watched results at home with family and close advisers and said he was taking nothing for granted despite the party’s commanding poll lead.
No party has won an outright majority since New Zealand switched to a proportional voting system in 1996.
The surprise of the election was the near 7 percent showing for the nationalist New Zealand First Party, led by the mercurial veteran Winston Peters, ousted from parliament in 2008 amid a scandal over secret donations.
Of the other parties, the Greens were on track for 13 seats from their current nine, and the Maori Party was looking to retain at least three seats reserved for the indigenous Maori people.
Two small parties that supported National in the outgoing government — free market ACT and centrist United Future — were both in tight struggles to retain their current seats and return to parliament.
