By Ranjani Ponnuchetty
Economists are predicting another interest rate cut this year as business confidence falls to its lowest level in more than four years.
According to the Institute of Economic Research's latest survey of business opinion, as inflationary pressures continue to weaken, firms are struggling to maintain current prices.
Around five percent reported slashing prices over the past quarter to levels not seen since June 1999.
Lower prices are impacting on profits but businesses are remaining optimistic.
This comes at a time when the sharp drop in the New Zealand dollar drives the rise in costs for manufacturers and retailers.
These businesses are hoping to pass the costs onto consumers in the coming months.
The survey also found dairy-intensive regions faring worse, as concerns about the upcoming drought remain a risk.
Almost 10 percent of firms expect deterioration in the country's economy.
That's a stark contrast to trading activity figures which shows that 12 percent reported an improvement to their business in the past quarter.
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