ASB Bank says New Zealand may be out of recession by the end of the year.
However, in its latest quarterly forecast, the bank warns any recovery will be very slow, but says a series of buffers will help cushion the domestic economy.
ASB chief economist Nick Tuffley says household budgets will be eased by lower interest rates and the falling cost of oil and food.
He says tax cuts on 1 October and new Government spending could also help return the economy to growth in the short term, although it will be "touch and go" whether this happens as early as Christmas.
A recession is defined as two consecutive quarters of negative growth. Gross Domestic Product was down 0.2% in the June quarter and 0.3% in the March quarter.
The last recession in New Zealand was in 1997-98 and lasted for nine months.
