UPDATE 1-New Zealand to go to economy-focused election on Sept 20
* NZ general election set for Sept 20
* PM Key's centre-right party has commanding lead, but needs partners
* Election to focus on economy
WELLINGTON, March 10 (Reuters) - New Zealand will hold its general election on Sept. 20, Prime Minister John Key said on Monday, in a vote that is likely to focus on his centre-right National Party's economic record.
An election for the 120-seat parliament was required by the end of the year, as the government was due to complete its three-year term.
"I'm announcing the election date well in advance as I believe this gives New Zealanders some certainty and is in the country's best interests," Key said.
He said the date was influenced by a Group of 20 summit due to be held in Australia in mid-November, to which New Zealand has been invited to attend as an observer.
Key said his government would campaign on its record of managing the economy, which has emerged strongly from recession and the global financial crisis.
The economy is forecast to grow at more than 3 percent over the next two years on the back of strong commodity prices and the rebuild of earthquake damaged Christchurch, while the government is forecasting a return to budget surplus next year.
A Reuters survey of six polls shows Key's National Party, which has been in power since 2008, with 48 percent support against the main opposition centre left Labour Party, which has 34.1 percent.
The early election notice, and National's commanding lead in the polls were seen favouring its re-election.
"It's the government's election to lose, the story has been for some time of a likely National (Party) win, and that Labour is the underdog," said political scientist Bryce Edwards.
The Labour Party, which led the government between 1999 and 2008, has been struggling in the opinion polls, with the leader of six-months David Cunliffe stumbling through a series of gaffes in the past month.
Edwards said National would undoubtedly help smaller parties who would be likely coalition supporters to get into parliament.
However, a close result might see the economic nationalist New Zealand First party led by mercurial, veteran politician Winston Peters holding the balance of power, if it is returned.
Under New Zealand's German-style proportional voting system, brought in 1996, the biggest party has always needed the support of minor parties to govern. A party must win either an electorate seat or gain 5 percent of the nationwide vote to get into parliament.
National currently has agreements with the centrist United Future, free market Act Party, and the indigenous Maori Party, which guarantee it a majority on all financial and confidence issues.