Heading into 2015, conventional wisdom among bank economists held that, despite a slowing economy, the Reserve Bank would have no choice but to raise interest rates, partly to follow the US Federal Reserve, partly because rising Auckland house prices had to be slowed, and partly because inflation would reappear sooner or later in the rest of the economy.
By mid-year, none of this was happening. The long-awaited removal of quantitative easing in the US had not yet begun and seemed to be receding ever further into the future. The strong exchange rate was importing deflation from the rest of the world and keeping New Zealand inflation pressures low.
Last but not least, no amount of monetary policy action appeared capable of restraining Auckland house price inflation, particularly thanks to record net migration caused more by New Zealanders coming home or staying home than by new arrivals from other countries.
What was an incredible terms of trade story has proved to be correct it was not credible!! So it is back to sourcing productivity gains as a driver of GDP growth.
In June, the Reserve Bank not only cut the Official Cash Rate from 3.5 per cent to 3.25 per cent, but also signalled there was plenty more where that came from. An OCR at 2.5 per cent by October looks to be in prospect.
Meanwhile, global dairy prices continued to fall. By the time of the first of two disastrously weak GlobalDairy Trade auctions, in late July and early August, the previously positive public mood about New Zealand's economic prospects flipped over to negative.
In the TVNZ Colmar-Brunton poll of July 11 to 15, some 41 per cent of those polled said they were pessimistic about the economy in the next 12 months, compared with 36 per cent who were positive. A year ago, more than half (54 per cent) were optimists about the year just gone, compared with one in five (22 per cent) having a negative outlook.
The Mood of the Boardroom survey shows a similar reversal in outlook. Our business leaders are uniformly less optimistic about the economic than they were a year ago, although at this stage, their pessimism is reserved more for the economy as experienced by others. "Own sector" optimism has held up a little better.
As the head of the Employers and Manufacturers Association Kim Campbell puts it: "The world is a mess but New Zealand is relatively well placed."
Beca's Greg Lowe agrees: "While there is concern about the impact sustained low dairy commodity prices may have in the near term, overall the New Zealand economy seems well diversified and generally robust.
"Offshore, the languishing Australian economy remains cause for concern to New Zealand. However, some parts of Asia are showing increasing potential. Low oil prices are helping in some sectors."
Also helping is a material correction in the strength of the NZ dollar, which today sits at around US65 cents, nominated earlier this year by Prime Minister John Key as a "Goldilocks" level -- neither too strong nor too weak.
While its fall is not enough to offset the impact of much lower dairy prices, it's a fillip to other exporters, many of which are performing somewhat better than in recent years. Beef, sheepmeat and wool, for example, are all bucking the trend with strong prices and increased demand. Talk is already turning to some dairy farmers reducing or abandoning milk production for alternative land uses.
Heavily exposed to dairy debt, banks are expected to hold hands with farmers in the expectation of a global price upturn, assisted by Fonterra taking the sting out of a historically low payout forecast for the current season by offering an advance of 50 cents per kilogram of milksolids.
Elsewhere, a range of high tech, software and service exporters are quietly enjoying the boon of a more competitive exchange rate.
This is the much-vaunted resilience that New Zealand political and business leaders have been talking up as the economic outlook has soured.
As Treasury Secretary Gabs Makhlouf has been telling anyone who will listen, a "rock star" economy is much less use than a "rock solid" economy, in which businesses are resilient, nimble and spread across enough different sectors to weather the storms inherent in a country exposed to agricultural commodity price cycles.
We're not there yet, but those themes come through strongly in the Mood of the Boardroom survey, along with fears about the potential to talk ourselves into recession. "It is clear the economy is facing some head winds in the period ahead," says Bruce Hassall, from accounting firm PwC. "But many parts of the economy are strong and resilience levels are robust. Our collective ability to talk ourselves into a slowdown is a real worry."
Asked what worries them most about New Zealand's economic prospects, business leaders nominate a lot of the usual suspects. Top of the list among external factors are weakness in the Australian and Chinese economies, instability in Chinese capital markets and low dairy prices.
But two sources of high concern unrelated to commodity price cycles also stand out. They are access to global capital and concern about cyber-security. In fact, cyber attacks rank as the fourth highest concern after weak Asian, Australian and dairy markets.
"I believe we are unprepared for cyber attacks" says veteran movie man John Barnett, from South Pacific Pictures, who also fears a wider complacency. "I think we believe our physical isolation will protect us from terrorism," he says.
For Craig Stobo, a long-time observer of the New Zealand economy now heading the Local Government Funding Agency, the collapse of the dairy-induced economic confidence of recent years is a useful wake-up call.
"What was an incredible terms of trade story has proved to be correct -- it was not credible!! So it is back to sourcing productivity gains as a driver of GDP growth."
Indeed, labour productivity, workforce skills, regulation and inadequate national infrastructure stand out as the areas of greatest concern for business leaders. Weakening consumer demand and over-priced housing worry them too, but not as much as the underlying settings that influence how the economy performs.
The implication is that policymakers need to turn their attention anew to policy levers that can make a real difference to long term economic performance. Here, business leaders remain disenchanted with perceived levels of red tape, with the old bogey of the Resource Management Act still high on the list, especially since government promises of substantial reform have run into the sand.
"Lack of support for RMA reform will remain a huge bugbear for business," says Business New Zealand's outgoing executive director, Phil O'Reilly. "It's still one of the main problems I hear about.
"We simply can't get that message through to many of the politicians who are being far too binary about the options. It's as if any balance in the environment/ development debate is a death sentence for the New Zealand we all know and actually, that we all love.
"Business people are environmentally conscious too," he insists. "But it's simply not responsible to say that no development is a good thing."
Ministers are suggesting they can achieve as much through existing RMA tools, such as much greater use of National Policy Statements, but even there the progress is painfully slow.
As the good times of a commodity cycle boom start to fade, the acid will be on political leaders to demonstrate how new approaches to policy can help turn the tide.
