Business confidence has lifted off a two year low but remains deeply pessimistic amid the Omicron outbreak, a slowing housing market, and surging cost pressures.
ANZ's monthly survey showed those thinking the broader economy will deteriorate this year eased to a net 42 percent this month from 52 percent in February.
The more closely followed measure of firms' view of their own prospects turned positive with a net 3 percent expecting better times from a negative 2 percent in the previous survey.
"There's a wariness evident across the ... survey that doesn't seem likely to be entirely due to the current Omicron outbreak," ANZ chief economist Sharon Zollner said.
She said the outlook was dominated by one key factor - inflation.
"Inflation expectations rose to a new record high of 5.5 percent and pricing intentions took yet another meaningful leg higher to a net 81 percent. Indeed, the latter suggests CPI (consumer price index) inflation is moon-bound.
"A remarkable net 96 percent of firms report that they expect higher costs. Can't get much more broad based inflation pressure than that."
Export, profit, and employment expectations improved, but there was a sharp fall in residential construction views, reflecting the apparent slowdown in the housing market.
The survey asked about wage costs, but Zollner said most firms expected the same level of rises as last year, offering little sign of a wage price spiral. Nor was there any significant sign that rising interest rates was having a significant effect on thinking, although finding skilled labour remained the major headache for many businesses.
The list of economic headwinds was significant with a quickening slowdown in housing and construction, the squeeze on household budgets and business margins, and cost pressures, she said.
"It's not a very pleasant mix, and the near-term growth outlook is clouded. But with inflation pressures now so extreme, and the RBNZ's inflation-targeting credibility on the line, it's full steam ahead for rate hikes - we're forecasting 50 basis points (half a percentage point) hikes in both April and May."