Gross domestic product (GDP) decreased by 0.8 per cent in the June quarter, following a revised contraction of one per cent in the March quarter, it was originally reported as minus 0.9 per cent.

A recession is defined as two consecutive quarters of negative growth. Today's data is widely expected to confirm that a drought and a weaker international economy had tipped the New Zealand economy into recession.

The economy grew by 1.2 per cent in the year to June 1998 compared with the year ended June 1997. This compared with a revised 2.3 per cent growth in the year to March 1998, originally reported at 2.2 per cent, and expectations of 1.4 per cent annual growth to June.

Government statistician Len Cook said the economy was now growing at its slowest annual rate in five years.

``The fallout from the severe east coast drought and the slump in Asian export markets has been a downturn inbusiness investment,'' he said.

He said businesses had cut back on investment in new plant and equipment and run down stocks.

As a result internal demand contracted 0.4 per cent in spite of rises in household and government spending. With the downturn in key export markets, export volumes fell for a second consecutive quarter, further adding to the contraction in GDP, he said.