Paddon holds a 43.9 second lead on his first event in a Subaru on home soil, with local favourite Emma Gilmour in second place, while reigning NZ Champion, Dean Sumner, is third, a further six seconds in arrears.
Both Matt Jansen (Subaru) and Dylan Turner (Mitsubishi) retired on the opening stage - Jansen with an engine failure, and Turner off the road.
In the Classic Rally of Otago, 1981 World Rally Champion, Ari Vatanen, is in second place after winning the final stage of the night in his Ford Escort RS1800.
Vatanen trails the Escort of Australian Stewart Reid, who has a four second lead, while another Aussie, Jeff David, is third in his Porsche 911.
Shane Murland had led the event before crashing his Escort off the road.
The Rally of Otago continues on Saturday and Sunday, with huge crowds expect in the forests to watch Vatanen do his stuff.
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