WELLINGTON, Aug 28 - Growth in New Zealand household borrowing was subdued in July, data showed on Thursday, as the finance minister warned the economy faced its greatest challenge in over two decades. The Reserve Bank of New Zealand said seasonally adjusted total household borrowing rose 0.3 percent in July, after a 0.3 percent rise in the previous month, suggesting consumer spending remained weak in the face of a slowing economy. Compared with a year ago, borrowing was up 7.7 percent, its lowest reading since early 2002. "Our suspicion is that we are not going to see much of a recovery in the household sector until the December quarter when the tax cuts come through," said Shamubeel Eaqub, director of investment research at Goldman Sachs JBWere. New Zealand is widely seen to have fallen into its first recession in more than a decade during the first half of the year, as soaring energy costs and tight credit conditions hit consumer and business spending and drought hits export industries. Finance Minister Michael Cullen said the country is facing serious challenges caused by tight global credit conditions and soaring commodity prices. "These are the most complex and challenging set of economic forces we have confronted in at least two decades," he told a business conference in Auckland. The Reserve Bank of New Zealand cut interest rates for the first time in five years in July and has since said it sees scope for further easing in policy. All 17 analysts in a Reuters poll predict the central bank will cut rates by a quarter point to 7.75 percent at the next review on Sept. 11. Most predict the cash rate to fall to 7.25 percent by the end of the year. Goldman Sachs JBWere's Eaqub said while signs were emerging that the economy may be bottoming out, any strong recovery was not expected until late 2009. Data on Wednesday had shown business confidence improved in August, boosted by a weaker currency and lower interest rates and oil prices, offering some signs that the slowdown may be bottoming out. Other second-tier data, including electronic card retail sales and credit card billings for July, have suggested that the worst of the slowdown may be over. ($1=NZ$1.42)