The New Zealand recession will deepen and trough around mid-2009, according to Goldman Sachs JB Were's economic outlook.

The financial service firm was predicting lower economic growth and the official cash rate (OCR) to be at 3.5 percent by the middle of next year.

It was also hinting at the possibility the OCR will be cut by 1.5 percent next month.

Shamubeel Eaqub, director of Australia & New Zealand Investment Research, said the domestic recession was well established and set to continue with tight monetary and financial conditions exacerbating a deepening and spreading housing bust.

Rapid deterioration in global growth prospects in recent months meant the outlook for 2009 was marked down.

The company now expected economic growth to slow from 3.2 percent in 2007 to an estimated 0.3 percent in 2008 and -1.0 percent in 2009, (previously 1.3 percent).

"Consensus forecasts for 2008 and 2009 are 0.5 percent and 0.6 percent respectively and do not fully incorporate the weak global growth prospects in our view," Mr Eaqub said.

"We now expect a more aggressive monetary easing cycle both in pace and trough. We expect the OCR to be reduced to 3.5 percent by mid 2009, mimicking a similar magnitude of cuts delivered post the Asian financial crisis."

There was equal risk of aggressive front loading and the Reserve Bank's (RBNZ) thus far observed reactive easing path.

"Our base case for the December 4 meeting is a 100bp OCR cut, a 150bp cut is close to even chance in our view."