KEY POINTS:
New Zealand business confidence slumped to a record low in December, suggesting the longest recession in 18 years may deepen.
A net 21 per cent of companies expect sales and profits will fall over the next 12 months, according to a December survey released by ANZ National Bank. That is the worst outcome since the series began in 1988.
The net figure subtracts the number of pessimists from the number of optimists. Businesses say they plan to reduce workers and cut capital spending as exports of milk, timber and wool subside, the housing market weakens and consumer spending falters.
Finance Minister Bill English said yesterday there was a risk the economy would not begin expanding again until 2010 amid fallout from the global recession.
Cameron Bagrie, chief economist at ANZ National Bank, said: "We are now seeing the consequences as we move beyond the financial crisis itself and into the real economic downturn. No one is immune."
English is cutting income taxes from April. Reserve Bank governor Alan Bollard has lowered the benchmark interest rate by 3.25 percentage points since July to revive the economy, which has been in a recession since the first quarter.
Bollard will lower rates by at least half a percentage point at his next review on January 29, according to a Bloomberg News survey of 14 economists.
- BLOOMBERG