Business confidence has all but disappeared, barely remaining in positive territory, according to the latest BNZ Confidence Survey.
Confidence has slumped to a net 6.9% expecting an improvement in the economy, down from 36.3% in September.
BNZ chief economist Tony Alexander said the latest result was the lowest since immediately after the earthquake on February 22 and continued a downward trend in place since the record level of sentiment (56.5%) recorded in June.
However, responses to the survey completed on Friday have also fallen to 391 in October, from 531 in September. But, the September figures seem an anomaly as the May, June, July and August response figures were also in the 314 to 384 range.
Mr Alexander said no clear theme came through from the written responses explaining why sentiment had changed so much. Only a few respondents explicitly noted poor news from offshore.
"No-one cited the credit rating downgrades. But there were a high number of people who noted that the Rugby World Cup is having a depressing effect on their current level of business."
Labour Party finance spokesman David Cunliffe said from Wellington that business confidence was in tatters as National failed one economic test after another.
"Today's massive slump in business confidence is another blow in a disastrous fortnight for the Government's economic record."
On September 30, New Zealand received a historic double downgrade from the ratings agencies Standard & Poor's and Fitch. That was the first downgrade in 13 years and the first time since the previous occasion, when current Finance Minister Bill English held the same post, Mr Cunliffe said.
The business confidence collapse followed other bad economic data which showed that between June 2008 and June 2011, the real median income fell by 6% , or $35 a week in today's dollars. A 3% nominal increase in median income over three years failed to match 9% inflation, he said.
Economic growth collapsed to just 0.1% in the second quarter and weak job data showed an rise of nearly 60,000 people on benefits since 2008.
"Not even record high dairy prices can hide the $37 billion of additional debt borrowed by this Government since it took office," Mr Cunliffe said.
Practically all comments from accountants were positive.
The response from the agriculture sector was mixed to positive with some happiness over the weakened New Zealand dollar. There was no obvious surge in farmer spending.
In construction, some operators were extremely busy with others seemingly on the verge of closing down.
There were mainly negative responses in the forestry, manufacturing and sawmilling, but fewer than in the previous two to three months.
In contrast to the increasing business of accountants, the legal sector was depressed.
Retail was mainly negative with 13 of 20 replies noting weak sales.
The tourism, travel and accommodation sector was worried about falling activity after the Rugby World Cup.
The vehicles and automotive sector remained generally weak. Consumers were not confident enough to buy new cars.
