Finance Minister Bill English says he believes the economy is pulling out of the recession but thinks it will be some time before recovery is reflected in a drop in unemployment.
Mr English says it is likely that figures to be released on Wednesday will show the economy starting to grow again. But the economy still faces a range of problems.
"The measure for most people of a recovery is whether or not unemployment is going up - and it's still going up. So we've got a lot of work to do."
Analysts from 10 major financial institutions surveyed by the New Zealand Institute of Economic Research agree that prospects are improving, but Wednesday's figures will still be negative.
The figures, covering economic activity in the three months till June, will show that gross domestic product has fallen for the sixth time in a row.
But the current quarter, which will be enumerated much later in the year, is expected to show a slight increase, technically ending the recession.
Growth thereafter is projected to rise to more than 3% in three years' time. But unemployment will linger, and 30,000 jobs are still to be lost from the recession.
Sharp improvement in balance of payments
In the meantime, lower payments to overseas investors have significantly improved the country's financial position with the rest of the world.
Figures released Tuesday show the current account deficit at $612 million at the end of the June quarter. That compares to a deficit of $2.1 billion at the end of the previous quarter.
The deficit was equal to 5.9% of GDP - the lowest proportion in five years - compared to 8.9% at the end of the previous quarter.
Payments to foreign investors fell to their lowest level in nearly a decade in the June quarter, and a $661 million writeoff by the BNZ after its court defeat in a tax avoidance case also helped.
Big lift in milk payout forecast
Fonterra has signalled a significant lift in its milk payout for the current season: up by 55 cents to $5.10 a kilo of milk solids, or just 10c short of the past season's payout.
Chairman Sir Henry van der Heyden says the revised forecast reflects a sustained improvement in commodity returns and a more positive outlook in international dairy markets, although the high dollar remains a worry.
Westpac economist Doug Steel says the increased payout will boost the New Zealand economy by about $750 million.
