A markedly weaker household savings rate is forecast than six months ago.
By the time of the election in late 2017, the current surge of migrants is expected to be falling, household spending patterns will be weakening and a brief boost to growth from increased government spending, especially on infrastructure, will be turning from mild stimulus to mild contraction.
Record numbers of tourists may also taper off if the global economy grows more slowly.
By then, however, the Treasury expects some compensating growth from a modest pick-up in export commodity prices and volumes, particularly as over-supply in the global dairy market eases. Dairy prices are expected to be US$3,400 per tonne by mid-2018, compared with US$2,203 per tonne at present.
Oil prices are expected to roughly double from around US$33 a barrel at present to US$63 a tonne by mid-2020.
For the next four June years, real GDP growth is forecast at 2.9 per cent (2017), 3.3 percent (2018), 2.8 per cent (2019) and 2.5 percent (2020).
That produces average annual growth of 2.8 per cent over that period, the same as the average of the last 20 years; unemployment remains below 6 percent; and the current account deficit on the balance of payments is contained at a manageable peak in June 2017 of 4.6 per cent of GDP.
Over the same period, the trade-weighted index for the New Zealand dollar is expected to fall from 70.5 to 69.5, whereas the forecasts six months ago saw the TWI at 66.4 by mid-2017.
Compared with the Treasury's half-year update published last December, inflation takes a year longer to get to the target 2 percent level - now seen in the June 2018 year - with very low inflation expectations seen containing price rises more than in the past.
Despite this mixed picture, Finance Minister Bill English said in his Budget speech that "only a handful of developed economies enjoy such a positive outlook."
The Budget forecasts, finalised last month by the Treasury, show net long term migration peaking at a net 70,700 inflow in the year to June 2016, dropping back to the long term average of 12,000 by 2019.
"Annual average growth in potential output is assumed to fall from 3 per cent in June 2016 to 2.4 per cent in June 2020 as population growth slows," the Budget documents say, with population growth contributing around 1.5 percentage points of that growth, higher than the usual 1.1 percentage point contribution from population growth.
While more hours will be worked, "labour productivity is expected to be lower than previously."
"In particular, growth in construction, retail trade and accommodation and other tourism-related sectors, which are relatively labour-intensive and tend to have relatively low levels of productivity."
In the first year of the four year forecast period, through to June 2017, private consumption drives growth with "low interest rates, solid real wage growth and the wealth effects from house price growth" all more than offsetting "the impact of lower farm incomes."
"Extremely accommodative" global monetary policy and a modest pick-up in trading partner growth in 2017 also underpin the near term outlook, although the forecasts note risks of lower growth throughout the global economy, with a particularly high risk of weaker growth in the Chinese economy.
