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With some indicators pointing towards unemployment rates pushing 10 percent, Finance Minister Bill English says "it is anyone's guess" how bad it will get.
Treasury has warned that the recession, which started in January 2008, would last at least until March 2010.
The outlook, delivered yesterday, was more pessimistic than previously, with unemployment picked to be higher than the previous 7.2 percent worst case scenario - leaving a further 60,000 out of work by next year.
A business opinion survey released today by New Zealand Institute of Economic Research (NZIER) made further grim reading.
The survey found that when seasonally adjusted the net balance of firms reporting a fall in their own activity worsened to 47 percent in the March quarter.
That was the worst result since at least 1970 and compared with 44 percent in the December quarter survey.
Expectations improved slightly but were still low, with a net 38 percent of firms reporting they expected a drop in their own activity in the June quarter, compared with a net 43 percent expecting a decline in the previous survey.
A net 36 percent of firms reported they intended to reduce staff numbers during the next three months, after a net 34 percent actually did in the past three months.
Those figures were the highest since late 1991 when the national unemployment rate was around 10 percent with a decade high peaking 1992 of 11.1 percent.
Mr English was not willing to pick how bad it would get.
"It is anyone's guess where it will peak. There will be another set of forecasts come out in the budget, but regardless of what those forecasts say losing another job is one too many," he said.
"The outlook for a lot of businesses is fairly negative. We have been expecting for some time that unemployment would rise. Unemployment is rising reasonably fast at the moment.
"That is going to inflict a lot of pain on some New Zealand households and we want to do everything we can to prevent that getting worse."
Mr English saw one bright side.
"Business opinion has stopped getting worse and I guess that is a good sign. It was dropping fast, now it is steady and that is good."
Results from the survey suggested the gross domestic product figure for the 2009 first quarter would be as bad, if not worse, than the 0.9 percent contraction seen in the December quarter.
Prime Minister John Key remained optimistic, saying Treasury's figures sat in the middle of predictions.
"We just don't know what those (unemployment figures) will look like, as I have said for quite some time I'm not going to predict a level of unemployment, the Government is focusing ... on insuring that we do everything we can to ensure either people stay in their current job or find another job."
Mr Key said the 60,000 figure "looks a bit high to me".