Companies are feeling increasingly positive but are holding off on investment and hiring decisions.
The NZIER's latest quarterly business opinion survey improved in the March quarter compared with the previous three months.
Optimists again outweighed pessimists, with a net 36% of firms optimistic, compared to 23% in December.
Hiring and investment intentions improved during the quarter, but firms still shed jobs.
Constraints on production levels are not being eased by increased investment in plant and machinary.
NZIER principal economist Shamubeel Eaqub expects employment and wage growth to remain weak for another 12 months.
He says the recovery is being constrained by firms and consumers repaying debt rather than increasing spending.
