Most prefer to say we are headed for an economic slowdown, evident from a weakening residential housing market, rising interest rates and inflation and the global credit crisis keeping the cost of funding high.
The economy appears unlikely to meet the technical criteria of a recession, two consecutive quarters of negative economic growth, with ASB chief economist Nick Tuffley saying there could be one negative quarter this calendar year.
But BNZ's head of research Stephen Toplis believes the country is headed for a recession and makes no excuse for using the term, saying consumers need to be shocked into realising the economy is headed for a difficult period.
"I am concerned households, investors and businesses think they are going to get away at worst with a softening in activity. What we're saying is it is going to be a really tough year.
"We are using the word recession, because it attracts attention.''
Even though the economy may not technically be in recession, compared to the sustained period of almost consistent economic growth of 3% or more, Mr Toplis said it would feel like one.
"You can get all pedantic about calling it a recession or not, but it will surely feel like a recession.''
The looming difficulty was likely to last through 2008 and into 2009, depending on the global economy and whether the drought continued to bite.
"Our core view is 2009 will also be a difficult year, but we could be caught by surprise by many factors,'' said Mr Toplis.
Businesses needed to look at stock levels, reduce debt and look after staff, households needed to lower debt and realise the time was not right to invest in speculative rental property, expecting 20% capital growth, he said.
Another factor would be the reaction of the New Zealand dollar, which had eased from its recent high of US81.57, and was likely to slip further as the economy weakened.
The dollar has reacted to the stream of gloomy economic news, losing nearly 2c against the US greenback in two days, closing local trade at 5pm yesterday at US78.57c after starting the week at US80.50c.
Mr Toplis warned that while the Reserve Bank might move to cut the official cash rate later this year, the higher cost of borrowing caused by the global credit crisis meant bank interest rates might not follow.
The higher cost of risk set by the international market would continue to be passed on to borrowers.
ASB chief economist Nick Tuffley agreed, saying that risk had already been built into interest rates.
Mr Tuffley and National Bank chief economist Cameron Bagrie did not think recession was an accurate term to describe the impending economic environment.
"I see 2008 being a year of growth, but very subdued growth, not a recession,'' said Mr Tuffley.
Mr Bagrie said earlier this week that to call it a recession would "wrap ourselves in further palls of gloom'', something New Zealanders were good at.
They both said businesses and people needed to tighten their belts.
Mr Tuffley said it would be tough as costs for everyday basic items such as mortgages, food and petrol have risen and could continue to do so.
"Relative to last year it will be tougher.''
The Reserve Bank was unlikely to offer any assistance in the short term by cutting the official cash rate until inflationary pressure reduced, and that might not be until later this year or early next year.
