New Zealand's businesses were less pessimistic about the outlook in February, but firms struggled to shake off concerns about the new government's policies while a slightly cooling housing market added to uncertainty about the economy.
An ANZ Bank survey on Wednesday showed a net 19 per cent of respondents expected the economy to deteriorate over the year ahead. That compared with a 37.8 per cent pessimism level in the previous month's poll.
The lingering pessimism prompted a sell-off in the local currency, which fell from $0.7240 to $0.7221. The currency then made up some of those losses, last trading around $0.7236.
This was the third ANZ business survey to encompass firms' reactions to the new Labour-led government, which took the helm towards the end of October and ended nearly a decade of centre-right National Party rule.
Uncertainty about the new centre-left government's policies saw business confidence slide to lows not seen since the global financial crisis in November.
Labour had promised to reduce inequality by curbing speculation in the housing market and placing restrictions on foreign investment and immigration, spooking businesses who saw the hot housing market and a swelling population as key sources of economic growth.
That pessimism has been slowly waning in the following months, but economists warned firms' confidence remain fragile as softness in the housing market and other areas suggested the economy might face some headwinds over the year.
"A slower housing market, a small dip in net migration, difficulty finding credit and already stretched construction and tourism sectors are making acceleration hard work from here," said Sharon Zollner, ANZ chief economist, in a note accompanying the release.
A brighter spot was firms' expectations for their own activity, with a net 20.4 per cent of respondents predicting their own businesses to grow in the next 12 months, up from 15.6 per cent last month.
(Reporting by Charlotte GreenfieldEditing by Shri Navaratnam)