Finance Minister Michael Cullen says plunging business confidence doesn't mean the country is facing an economic crisis.
The latest National Bank Business Outlook survey, released today, shows the lowest level of business confidence since 1988 amid expectations of further interest rate rises and a potential economic slowdown.
Dr Cullen said the Reserve Bank and the Government had been saying since well before the election that the economic growth rate needed to slow down.
"That hasn't happened as early as we would have liked but this survey, along with other data, suggests we're going to see some slowdown," he said on National Radio.
"But we still have the lowest rate of unemployment and the strongest labour market in the developed world -- we're not looking at some kind of crisis or some kind of major depression."
Dr Cullen said the high value of the dollar against other currencies had been "a great worry" for the Government.
"One of the problems we've got into is that monetary policy operating through interest rates, trying to bring down the rate of growth, has probably helped hold up the level of the exchange rate," he said.
"But that's also been assisted by a weak US dollar and strong meat and dairy prices."
Council of Trade Union president Ross Wilson said business leaders' "doomsaying" was jeopardising the security of ordinary, hard-working New Zealanders.
Some business leaders were motivated by politics and a desire for further economic reform, for which an economic slowdown could provide justification, Mr Wilson said.
He added: "We have seen business lobbyists talk down the economy before and they seem determined to do it again."
Negative assessments of the economy could become a self-fulfilling prophecy that would hurt workers, Mr Wilson said.
National's leader Don Brash said the Government should not be surprised by the slump in business confidence.
"The chickens are coming home to roost... Labour is starting to feel the public backlash from its total failure to adopt policies which will lift living standards in the long-term," he said.
"The indicators are beginning to turn on the Labour Party, which has coasted along on the back of a buoyant economy. Now the roadblocks it has erected to growth are beginning to take their toll."
Dr Brash said Treasury was urging the Government to cut taxes, but it was being ignored.
Dr Cullen said issues raised by companies in the gloomy survey, such as skill shortages and compliance costs, were being addressed.
"Compliance costs are actually low by international developed country standards, we continue to work on ways to reduce them," he said.
"We clearly have work to do on improving productivity. We can't suddenly push a button -- we've got huge amounts of money going into skills training and massive amounts of money going into infrastructure."
Dr Cullen said the Government had to continue to run a tight fiscal policy.
"The essential argument in the election campaign, which now seems to be forgotten, is that everybody was saying we should run a much looser fiscal policy in order to pay for tax cuts in the short term," he said.
"The Reserve Bank said yesterday, and the Treasury said last week, was that the Government should not engage in any further fiscal loosening.
"But that got lost in the rush to try to grab some tax cuts from somewhere."