The Northern Employers and Manufacturers Association says the Reserve Bank should heed a fall in business confidence as a sign the economy is too fragile to withstand further interest rate rises.
When the Reserve Bank raised the Official Cash Rate (OCR) to 2.75% last month, it signalled more rate hikes in the future.
However the association's chief executive, Alasdair Thompson, says the latest business opinion survey confirms the economic recovery has hit a plateau, and warns another OCR rise could cause it to go into reverse.
Westpac Bank chief economist Brendan O'Donovan says that thinking is wrong and what's important for New Zealand is that Asian economies are still growing fast and commodity prices are at highs. However the chief economist for the consultancy BERL, Ganesh Nana, disputes there's any real recovery in exports - with only wine and logs doing better than a year ago.
In its quarterly survey, the Institute of Economic Research found that optimists outnumber pessimists, with a net 18% of firms expecting the economy to improve in the next six months. In the previous survey the figure was 22%.
Don't derail export-led recovery, economist warns
The institute is also urging the Reserve Bank to leave interest rates alone, warning that if it doesn't, it may derail an export-led recovery.
Principal economist Shamubeel Eaqub says further increases in the cost of borrowing may kill off already weak demand in a stuttering but expanding economy.
More firms intend raising prices in the next three months, Mr Eaqub says, but he questions whether they will be able to do so, given weak demand.
Capacity utilisation - a measure of firms' ability to lift production - rose slightly to 90.8%, but Mr Eaqub says that figure's distorted by a strong export-focused building materials sector.
The quarterly survey also showed the pace of sales growth and profitability slowed, hiring intentions remained flat and investment plans dipped.
Australia holds rates
Meanwhile, Australia's Reserve Bank has left the benchmark interest rate on hold at 4.5% for the second consecutive month.
The central bank says the decision was appropriate given caution in financial markets about Europe's debt problems and uncertainty about the pace of future global growth.
And after increasing the cost of borrowing six times between October and May, it notes household spending is modest.
But it remains upbeat about Asia's prospects and its strong demand for minerals, while expecting business investment to continue to grow in Australia over the coming year.
Economists say the Reserve Bank will be weighing up inflation pressures against the durability of global growth as it considers future interest-rate levels.
