New Zealand business confidence rose to its highest in more than three years in June, led by the construction sector.

A net 50.1 per cent of firms expect general business conditions to improve in the year ahead, up from 41.8 per cent in May, and the highest level since early 2010, according to the ANZ Business Outlook.

Firms seeing a pickup in their own business activity in the year ahead rose to a net 45 per cent, up from 34 per cent.

Sentiment is highest in the construction sector, with a net 73.4 per cent seeing better times ahead for the economy, followed by services at 55.2 per cent, retail at 51.5 per cent and agriculture at 39.6 per cent. Manufacturing lagged other sectors at 38.7 per cent but was still dramatically higher than the 6 per cent recorded a year earlier.


Improved business confidence combined with upbeat consumer confidence pointed to the potential for 4.4 per cent growth by the end of the year, ANZ said. That is ahead of the central bank's expected 2.4 per cent growth rate and the economy may not have the capacity to grow that fast, ANZ said.

"This may be a case of 'the spirit is willing but the body is weak," ANZ New Zealand chief economist Cameron Bagrie said in a statement. "Given the skill and broader resource mismatches in the New Zealand economy, we are sceptical that such a growth rate is achievable - it's certainly not sustainable."

The survey showed profit expectations, employment and investment intentions all lifted, led by the construction sector, ANZ said.

Some 25.9 per cent of firms expected profits to rise in the next 12 months, up from 19.7 per cent last month and the highest since April 2010. A net 17 per cent expected to take on more workers, up from 9.8 per cent last month and the highest in two years.

Meanwhile, some 22.3 per cent expected to increase investment, up from 16.5 per cent last month and the highest since late 2003.

Pricing measures remain benign but are creeping up led by construction with a net 25.8 per cent of firms expecting to raise prices, up from 20.3 per cent last month.

Inflation expectations lifted slightly at 2.3 per cent from 2.22 per cent last month.

The survey canvased the views of 414 businesses.