* What: NZ third-quarter gross domestic product
* When: Friday, Dec. 23 10:45 a.m. (2245 GMT Thursday)
* Economy seen contracting 0.5 pct, recession deepening.
By Gyles Beckford
WELLINGTON, Dec 19 (Reuters) - New Zealand's recession is expected to have deepened in the third quarter, with the economy contracting at its fastest pace in eight years, as the global turmoil exacerbated the local slump, a Reuters poll shows.
The third quarter growth data is seen backing the case for further interest rate cuts and higher government spending.
The economy has been in recession since the start of the year but analysts said the central bank would pay more attention to the global environment than historical local data.
"The big judgements will be about what's happening in the G7 and emerging economies and whether what we've seen for the past three quarters locally is just the tip of the iceberg," said Deutsche Bank chief economist Darren Gibbs.
A Reuters poll of 12 economists forecast that New Zealand gross domestic product fell 0.5 percent in the September quarter after dropping 0.3 percent and 0.2 percent in the first two quarters.
Tight credit conditions and high costs dented domestic spending and a drought hit agricultural output, analysts said.
The forecast decline in activity would be the biggest quarterly decline in eight years. New Zealand was last in recession in 1997-98 following the Asian financial crisis and a drought.
The central bank has forecast third-quarter activity shrank 0.3 percent.
Statistics New Zealand will release the data at 10:45 a.m. on Dec. 23 (2245 GMT Dec 22).
Although the data is historic, analysts said a bigger-than-expected contraction would concern the Reserve Bank of New Zealand (RBNZ) given the deepening global credit crisis.
The central bank has responded to the recession and global slowdown by slashing interest rates by 325 basis points since July to a five year low of 5 percent and has said further small cuts are possible.
The latest Reuters poll has a consensus view that the central bank will keep cutting rates to 3.5 percent by the middle of the year.
RBNZ Governor Alan Bollard surprised earlier this month by saying that the economy has probably already moved out of a "shallow recession" in the fourth quarter and will now go through a period of "shallow growth".
But the new finance minister Bill English has said the economy is probably still in recession, which might end next year.
He plans further income tax cuts and accelerated spending on infrastructure, worth a total of NZ$9 billion over the next two years, to help lift the economy out of recession.
Third quarter GDP is expected to be 0.1 percent lower than the same quarter a year ago, from 1 percent growth in the second quarter.
Average annual growth is expected to slow to 1.7 percent in the year through the third quarter from 2.6 percent in the previous quarter.
The third quarter's contraction is expected to be broad based, with consumers spending less, businesses investing less, and exports falling.
The housing market, once a key inflation concern for the central bank, has slowed sharply with sales sitting around 16-year lows.
"The bigger question for the market is whether the lower petrol prices, large interest rate cuts and fiscal expansion are doing enough to offset the weak housing market and the pain from the international recession," said Westpac chief economist Brendan O'Donovan. "Indicators suggest actions to date are helping to stem the bleeding, but more needs to be done." (PCT CHANGE) Median Average Range Vs previous qtr -0.5 -0.5 -1.0 to -0.3 Vs same qtr yr ago -0.1 -0.1 -0.6 to +0.1 Yr to qtr (annual avg) +1.7 +1.6 +0.5 to +1.8 (Editing by Kazunori Takada)