Wellington - The New Zealand economy is in a recession, having contracted for two successive quarters, the Treasury said Tuesday in its monthly review of economic indicators.

The report backed consistent speculation of a recession by analysts, though this will not be officially confirmed until Statistics New Zealand releases economic data for the June quarter next month.

This is expected to show that the New Zealand economy registered negative growth in the quarter following a contraction in the first three months of the year.

The Treasury, the government's principal economic adviser, predicted that growth would pick up in the December quarter, following tax cuts scheduled to take effect on October 1 and an expected further cut in the central bank's benchmark interest rate of 8 per cent.

But even combined with a forecast recovery from last summer's drought, high export prices for dairy products and a weakening New Zealand dollar, economic growth in the calendar year was unlikely to be more than 0.5 to 0.75 per cent of gross domestic product.

The report said that annual inflation was expected to peak at about 5 per cent in September. (dpa)