WELLINGTON, July 9 (Xinhua) -- Economists agreed New Zealand is in a recession, but differ on how serious the downturn is.

    It followed the release of the New Zealand Institute of Economic Research's quarterly survey, showing the economy contracted in the first quarter, Radio New Zealand reported on Wednesday.

    Economic activity fell 0.3 percent in the three months to Marchand latest Treasury figures suggested the economy also went backwards in the June quarter.

    Two consecutive quarters of negative growth means a recession.

    Westpac Bank and Deutsche Bank's chief economists believe New Zealand is already in a recession.

    Brendan O'Donovan from Westpac said there is a 90 percent probability that a recession has begun.

    O'Donovan said the downturn has been made worse by the impact of shocks from the oil sector, the credit and housing markets, and the drought.

    Darren Gibbs of Deutsche Bank believed the economy has been on a downward spiral for about 9 months.

    To recover, Gibbs said, the Reserve Bank will need to ease official interest rates at its monthly review on July 24 instead of September, as earlier forecast.

    He said easing the Official Cash Rate would mark the beginning of a series of cuts through until the middle of 2009. This should bring the benchmark rate down to about 6 percent and mortgage rates down to about 8 percent.

    The Treasury said a fragile economic rebound in the second half of this year is possible, due to dairy payouts and tax cuts.

    However, economic forecaster Infometrics said New Zealand could be in recession until September or longer.

    Infometrics director Gareth Kiernan said the Treasury is being too optimistic and expects the economy to be sluggish for at least five years.

    Finance Minister Michael Cullen said nearly 2 billion NZ dollars (1.6 billion U.S. dollars) worth of tax cuts -- which come into effect from Oct. 1 -- will help buffer against the slowdown in consumer spending.

    The latest survey by the New Zealand Institute of Economic Research showed business confidence remained deeply negative in the three months to June.

    Its quarterly survey of business opinion showed a net 64 percent of companies expect general conditions to deteriorate in the next six months.

    It is the highest level of pessimism since December 1974, but is unchanged from the previous quarter.

    The survey also ascertained the number of companies that increased their prices in the past three months and those that intend to do so in the coming quarter is at its highest level since 1987.

    Official figures showed the New Zealand economy contracted in the first quarter, and most economists expect figures for the second quarter will also show a contraction.

    NZIER chief executive Brent Layton said the survey suggests that will not be the end of the downturn.

    Layton said the Reserve Bank would be unwise to lower interest rates just yet, as it would provide only short term gain, causing further inflationary pressures in the long term.