Across the Tasman New Zealanders are feeling the pinch of the global economic meltdown just like the rest of the world, but with one small difference. The country, with a population of just four million people, has a distinct advantage: the scale of its services and business is markedly smaller than much of the rest of the Western world. The New Zealand legal sector, unlike the UK, the US and even Australia, has been a little more cautious in fattening up over the last few years, leaving NZ law firms with little around the waist in need of trimming.

That's not to say that law firms in NZ are not feeling some pain. They are. Indeed, all the usual practice area suspects are having their ups and downs. The property market has slowed, while development and planning law work comes to a halt. Mergers and acquisitions is quiet but insolvency, debt reorganisations are, not surprisingly, growing as the economy turns backwards.

But there's a breath of fresh air in the NZ legal market that smells a lot sweeter than elsewhere. All four law firms Lawyers Weekly spoke to said they were "cautiously optimistic" about the future. Perhaps such comments of hope are not so surprising from the mouths of key individuals within law firms, they do after all, have a reputation to protect. This time, however, such words of encouragement are actually believable.

"I think the point to make is that NZ certainly went into recession conditions earlier than the Australian economy," says partner John Hannan, team leader at the Auckland office of DLA Phillips Fox. "The commentary here is that there is a measure of cautious optimism that we might be getting near the bottom of the cycle."

Andrew Poole, managing partner of Chapman Tripp agrees, noting that no respectable managing partner in NZ could deny that the recession has had an impact on their practice. "In Australia, there is a sense from here that there was a greater degree of shock than what we experienced," he says. "We're adjusting to life in recession."

Such adjustment comes from law firms seeing opportunity in the current economic conditions. Hannan says at DLA, the firm has moved to establish a financial crisis response team, pooling multi-disciplinary lawyers together to form a specialist group. At Chapman Tripp, Poole says that 12 months into recession, the market is experiencing a considerable amount of change, opening doors to plenty of legal work.

"Law firms thrive and grow on change," says Poole. "If there is no statutory change, no law changing, if sectors aren't changing and it's all business as usual then there is not a huge demand for the sorts of legal work that Chapman Tripp undertakes."

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Poole adds that it comes back to pulling in opportunity from the devastation. "Are you going to close your eyes and huddle in the corner to wait for the storm to pass, or are you going to open your eyes and think times might be tough in an economic sense, but the change and the turbulence in the economy is generating some great opportunities," he says. "The prize is going to go to those who are out there generating opportunities."

Seeing a bright light for law firms at the end of the dark tunnel might come back to the sector's guarded approach to building their firms over the last few years. Hannan notes that the average wage in NZ is significantly lower than the average wage in Australia and other jurisdictions. NZ firms are simply not dealing with a large and out-of-control economy. Their approach has been more measured, and vigilant in structure.

Bell Gully chairman Roger Partridge says a big difference between the NZ legal market and markets overseas is that the largest NZ law firms are typically quite small compared with other jurisdictions, usually with less than 50 partners. "People are less specialised - which makes us more flexible," says Partridge. "It's been easier for us to respond to the changing marketplace than it has been for the big international firms."

Such flexibility may be responsible for the fact that, for the most part, lawyers in NZ have confidently kept their jobs. Redundancies are few and far between, and while no firms admitted to be actively hiring, all said they were filling vacant positions as they became available and had made little to no changes to their graduate programmes.

That's not to say that the NZ market isn't saturated with lawyers. The meltdown across the legal sector in the UK and the US has encouraged many New Zealanders to return home, in a reverse brain drain that is allowing law firms to quickly fill positions with high-quality talent.

For NZ firms, the talent drain into the Northern Hemisphere that seemed like such a lost cause only a few years ago, now appears to have been a blessing in disguise. Poole says it has helped NZ firms maintain a consistent numbers base. "We have been put under enormous pressure by the Northern Hemisphere, where they have been taking our lawyers after only two or so years' experience off to London and New York," he says. "But now, this means that there is no real imperative, at least not as things stand at the moment, for firms to shed massive numbers of staff to right-size things."

At Buddle Findlay, partner Peter Chemis says that while clients may not be asking as much of the firm as they once did, the market is by no means dead. A helpful factor, he says, is that the firm has for some time been running with a relatively low ratio of staff to partners. He says clients are demanding assistance from more senior lawyers, and that the firm's strategy of hiring only a limited and small number of junior lawyers each year has helped.

"We've been getting the best that we can out of a competitive market while not lifting our numbers too high," says Chemis. "That's really a broader strategy for the medium term, rather than amazing foresight on our behalf."

As a market that has been drained of its best lawyers for so long, the opportunity to get back ahead of the talent game is also a relief for NZ law firms. These days, they are taking their pickings from the best lawyers available. At Bell Gully, Partridge says it's a chance to get back those individuals who had previously been lost to seemingly more attractive options overseas.

"We are hiring very selectively," he says. "We've taken the opportunity to bring back some of our most talented alumni from the Northern Hemisphere. We're treating this as a once-in-a-generation opportunity."

For a country so deep into a recession that it can already, almost see the other side, New Zealand law firms have proven that sometimes, less is best.