May 19 (Bloomberg) -- Canada's Prime Minister Paul Martin faces a budget vote today that his Liberal Party must win to remain in power and avert a second national election in a year.

Lawmakers will vote on the budget's two bills starting 5:45 p.m. in Ottawa. Martin has said he will dissolve parliament if he loses either vote.

Martin's chances of surviving the vote in a divided House of Commons improved this week with the defection of Conservative Party lawmaker Belinda Stronach to his party. The Conservatives and Bloc Quebecois have sought since April to oust the government over a corruption scandal in Quebec.

``It's increasingly looking like the Liberals will win the budget vote,'' said Ted Carmichael, senior economist for JP Morgan Securities Inc. in Toronto. ``An election would be deferred for several months and wouldn't be a focus of daily attention for the market.''

The Canadian dollar, little changed today, rose for a second day yesterday as investors speculated the defection of Stronach, a former leadership candidate for the Conservatives, will ensure the government survives. The dollar traded at 79.26 U.S. cents.

With the addition of Stronach, the balance in parliament has tilted toward the government. Martin's Liberals and his allies in the New Democratic Party have 152 votes in the House of Commons, matching the 152 seats for the Conservatives and the Bloc Quebecois.

The Speaker of the House, a Liberal, votes only to break a tie and would likely side with the governing party. There are two undecided members of parliament sitting as independents, both of whom would need to vote for the Conservatives for the government to fall.

The Conservatives plan to support the main budget bill today. They'll oppose an amendment that calls for increased spending on education and the environment. Both votes are considered confidence motions.

Election

If Martin survives the vote, he has pledged to hold an election early next year, after a public inquiry into a government advertising program in Quebec is completed.

Martin, 66, lost his party's majority in elections last June amid reports of misspending in the marketing campaign, which tried to curb support for Quebec separatism in the late 1990s. Conservative Leaders Stephen Harper and Bloc Quebecois Leader Gilles Duceppe sought to topple the government after advertising executive Jean Brault testified at the inquiry last month he gave the Liberals about C$1.2 million in exchange for contracts.

Minority governments have lasted on average 16 months in Canada, and Martin leads the first minority administration in a quarter century.

Harper, 46, has suggested he may not press efforts to oust Martin if the budget passes.

``We are not going to try this vote over and over,'' Harper told reporters on May 16, after Stronach said she will join the Liberals.

Campaign

If Martin loses the budget vote, an election would likely be held in June or July, following a campaign of at least 36 days. Martin would likely campaign on his program to boost spending on health care and day care, and accuse Harper of forming an alliance with the separatist Bloc Quebecois.

Harper, a native of the Western province of Alberta, will paint the Liberals as a corrupt party, and push for increased tax cuts for companies and individuals.

The polls indicate neither party has enough support for a majority, leading to the first back-to-back minority governments since the 1960s. The Liberals have the support of 33 percent of Canadians, compared to 30 percent for the Conservatives, according to a poll by The Strategic Counsel published by the Globe and Mail.

The survey, taken between May 12 and May 15, had a margin of error of 2.5 percentage points.

An election wouldn't necessarily rattle investors, said Avery Shenfeld, an economist at CIBC World Markets in Toronto. Shenfled said it would at least put an end to the impasse in the House of Commons, which ground to a halt this month after Conservatives and Bloc Quebecois refused to take part in debate.

``Financial markets will benefit once this issue is behind us, whether there is an election or a deferral of an election,'' Shenfeld said.

To contact the reporter on this story: Theo Argitis at targitis@bloomberg.net

Last Updated: May 19, 2005 07:39 EDT