NZIER data at the end of September revealed business confidence was at its lowest level since 2009, with increased pessimism around the trading and investment outlook.
Westpac economists, including Dominick Stephens, say the weak confidence "adds to the likelihood of another OCR cut at the November Monetary Policy Statement, despite the RBNZ’s seemingly noncommittal comments at its September review".
They added: "We have maintained that weaker data between the two review dates would prompt the RBNZ into action; the business confidence survey certainly fits that bill."
The Westpac team say interest rate swap markets are pricing in "some chance" there will be a 50 basis point cut in November, "no doubt with an eye to the precedent set in August".
Westpac economists said they had not seen "a build up in inflation pressures" and suspect the next available set of data around inflation will "remain subdued", adding further weight to to another OCR cut.
The economists said the case for a cut after November was "not so clear cut", but the economy was not living up to the RBNZ's forecasts of a gradual pick up in the second half of this year.
Since the 50 basis point rate cut in August, banks have shifted to more aggressive predictions for the OCR. Kiwibank and ASB believe the OCR will drop to just 0.5%.