WELLINGTON: New Zealand Institute of Economic Research's latest Quarterly Survey of Business Opinion indicated on Tuesday the post-election bounce in business confidence and activity seen in the final quarter of last year was short-lived.

A net 24 percent of businesses in the March quarter expected a deterioration in the general economic outlook over the coming months on a seasonally adjusted basis.

Firms' own trading activity was similarly sobering, with a net 23 percent of firms reporting a decline in activity over the March quarter.

This was a marked turnaround from many businesses having reported increased activity in the previous quarter.

Overall, the results point to higher interest rates having their intended effects in dampening demand to reduce inflation pressures. In addition to a weaker demand, uncertainty over the new government's plans regarding spending and public sector cutbacks was likely prompting the caution among businesses toward hiring and investment, according to the survey.

A net 11 percent of firms reduced staff numbers in the March quarter, although hiring intentions for the next quarter were marginally positive, the survey said.

The emerging optimism firms had felt in the previous quarter toward investment appeared to have dissipated. A net 14 percent of firms planned to reduce investment in plant and machinery over the coming year, while a net 8 percent planned to reduce investment in buildings.

A decline in cost and pricing indicators suggested a further easing in inflation in the New Zealand economy, according to the survey.