Wellington  - The New Zealand economy is over the worst of the recession, and business confidence is surging to the highest level in a decade, an influential think tank reported Tuesday.

The New Zealand Institute of Economic Research said that its latest quarterly survey showed a majority of companies expected a significant acceleration in activity in the current December quarter.

But the economists warned of a "considerable disparity between expectations and reality" and said the recovery would be gradual.

"While firms are clearly more confident about the economic outlook, their recent performance has been weak, and they remain cautious about hiring more staff or lifting investment," the report said.

"This suggests that a shallow recovery from the recession is likely."

More good news came from a Bank of New Zealand monthly survey showing that a net 50 per cent of respondents expected the economy to get better over the coming year.

The New Zealand Stock Exchange's key index of top-50 shares closed Friday at its highest level of the year.

The exchange's market for trading debt securities broke capital- raising and trading records in the third quarter, with an all-time high of 3 billion New Zealand dollars (2.2 billion US dollars) raised in the year to date, said Fiona Mackenzie, head of traded products and liquidity.

"Overall, things are moving in the right direction, and we are seeing evidence of confidence returning to markets," she said. (dpa)