In fact, they are predicting pessimism to reign in the year ahead as the post-election sugar hit to business confidence has fizzled.

The bounce in confidence after last year’s election proved to be temporary, faltering at the beginning of this year.

Kiwibank says measures of expected activity remained depressed and a period of below trend growth lies ahead.

In the latest NZIER survey of business confidence a net 24% are expecting the economy to deteriorate, while their own activity has similarly been negatively affected.

Amidst an environment of softening demand, firms are remaining cautious about investment and hiring.

However, business costs are easing, which is good for fighting high inflation – the reason the RBNZ says it needs to leave the OCR higher for longer.

The NZIER says inflation will continue to moderate and return to the target band of 1-3% later this year.

Kiwibank says the latest NZIER report will be what the RBNZ wants to see – evidence that demand is cooling and economic activity is softening. Heat is leaving the economy and monetary policy is clearly working, Jarrod Kerr, Kiwibank’s chief economist says. 

“Next up? Rate cuts. Soon, but most likely, not until November. Today’s RBNZ announcement should be a non-event. We are not expecting a change in policy or stance. The April review is simply a stepping stone to the more detailed statement in May.”

Meanwhile Westpac says the NZIER survey provides mixed messages for the RBNZ.

On one hand, higher interest rates are clearly continuing to have a braking effect on activity. However, the fact that inflation is receding only slowly will remain a concern, Michael Gordon, Westpac senior economist says.

“We think the RBNZ will be looking for more reassurance from the upcoming CPI and labour market reports before they consider signalling an earlier start to OCR cuts.”