Optimism among New Zealand business leaders is at a two-decade high, but further interest rates rises are expected, according to a quarterly survey of business opinion by an independent economic think-tank on Tuesday.
Trading activity, which closely mirrored GDP growth, accelerated to the fastest pace since December 2003, when annual GDP growth was near 4.5 percent, according to the New Zealand Institute of Economic Research (NZIER) survey.
"While we do not expect economic growth to hit such heady rates in the current business cycle, as credit conditions are very different now, our latest survey paints a clear picture: the recovery is strengthening," NZIER principal economist Shamubeel Eaqub said in a statement.
Business confidence held steady in the March quarter and remained at the highest level since mid-1994, and this optimism was being realized in hiring, investment, increasing margins and profits.
Intentions to invest in building, in particular, were soaring and at the highest level since records began in 1975.
However, price increases were accelerating as consumer demand strengthened.
Increased inflationary pressure meant more financial services sector firms expected interest rates to rise.
The survey results were released the same day as the Treasury published government accounts showing tax revenue below forecast for the fourth straight month in February.