Business confidence in New Zealand dropped after the central bank tightened monetary policy and raised interest rates.

According to a survey by ANZ National Bank Ltd. released in Wellington on June 27, the confidence of New Zealand's business community that they can rake in sales and profits in the next 12 months dropped to 38.5 percent as compared to the 45.3 percent recorded in May.

A senior economist from an ANZ bank based in Wellington said this is an acceptable figure considering the size of the financial downturn.

The economist added that this is in line and consistent with an estimated 4 percent domestic growth for the country.

On June 10, Central bank Governor Alan Bollard scaled up the official cash rate for the first time in three years. This could also prompt the central bank governor to increase borrowing costs gradually this year and next, which should coincide with growth rates.

The New Zealand dollar was a little changed after the report. It bought 71.16 U.S. cents at 3:13 p.m. in Wellington trading from 71.14 cents immediately before the report was published.

Company Profits will increase but...

A net 19 percent of the 479 companies surveyed predicted profits would increase, albeit not as fast as from 24 percent last month, the survey showed. Employment intentions also fell, with 13 percent expecting to hire more workers.

Some 39 percent of firms expect to raise prices in the next three months, up from 28 percent in the last survey.

A net 40.2 percent expect the broader economy will improve, down from 48.2 percent in the May survey.

"The rate of increases in profits will not be as big before given the crises recovery levels the world economy is experiencing," said an analyst from Macquarie Securities.