A key business confidence survey shows the export-led recovery in the economy could be running out of steam.
Business confidence fell in the three months to the end of June, casting doubt on the strength of the economic recovery.
The Quarterly Survey of Business Opinion by the New Zealand Institute of Economic Research (NZIER) shows that while optimists still outnumber pessimists, with a net 18% expecting the economy to improve, that figure is down from 22% in March.
Falling confidence among manufacturers is attributed to the weakening recovery in Australia. Confidence among construction firms and architects has also fallen.
Fewer jobs were shed in the most recent period but the number of firms intending to take on more workers fell.
Bank urged to hold OCR at 2.75%
Despite firms saying they intend to raise their prices, the institute's principal economist, Shamubeel Eaqub, says that there are signs the recovery is stalling and that the Reserve Bank should keep the Official Cash Rate on hold at 2.75%.
The pressure for price rises stems, he says, from one-offs such as higher ACC charges and the effect of the Emissions Trading Scheme rather than from strong demand for goods and services.
Mr Eaqub says the survey suggests the economy will grow by 2% to 3% over the coming year. That compares to the Reserve Bank and Treasury's most recent forecasts of more than 3%.
Bank was 'overly optimistic'
The Manufacturers and Exporters Association says the survey results show the Reserve Bank has been overly optimistic about the economy.
Chief executive John Walley says that's why he lobbied for the Official Cash Rate to stay stable. Since it was raised, he says, there's been nothing but bad news.
Mr Walley says the rate should definitely stay on hold now until at least September.