AUCKLAND – New Zealand business confidence slumped to a record low in December after the central bank delivered an unprecedented jumbo interest-rate hike and predicted the economy would enter a recession in 2023. 

The monthly index of business sentiment fell to minus 70.2 from minus 57.1 in November, ANZ Bank New Zealand said on Tuesday in Wellington. A gauge of own-activity expectations fell to minus 25.6 from minus 13.7. 

The Reserve Bank of New Zealand (RBNZ) in November raised the official cash rate by a record 75 basis points to 4.25 per cent and projected the benchmark could rise to 5.5 per cent in 2023 as inflation pressures continue to buffet the economy. Rising costs and falling house prices are beginning to knock consumer confidence and household spending, with most economists agreeing with the RBNZ that a recession is imminent.

“The Reserve Bank certainly got the shock value we suspect it was aiming for at its November monetary policy statement,” said ANZ New Zealand senior economist Miles Workman. “Nothing like saying you’re deliberately engineering a recession to put a damper on investment and employment plans.”

The New Zealand dollar fell after the release of the business confidence data. It bought 63.50 US cents at 1.05pm in Wellington, down from 63.60 cents beforehand. BLOOMBERG