The Institute of Economic Research considers the economic cycle has passed its peak but that it will moderate to a still healthy pace, with growth slowing from 3.3 per cent in the current March year to 2.6 per cent next year and 1.8 per cent the year after.
"The outlook is still quite positive. We are still going to be eating up spare capacity. There will be new jobs and eventually some pressure on wage and prices, but not immediately," said NZIER principal economist Shamubeel Eaqub.
"It is too gradual and too much of an unlevered economic recovery to be the big inflationary risk the Reserve Bank still seems to be thinking of."
Firms and households were unwilling to take on too much debt, Eaqub said.
"This is in sharp contrast to previous recoveries, which were accompanied by more borrowing and investment.
"This missing ingredient means the recovery is slower than usual, but it also means that the recovery cycle will be longer and more sustainable."
The Canterbury rebuild is still gearing up strongly.
"However, from 2015 onwards, parts of the rebuild and repair programme will be progressively completed.
"This means that the Canterbury rebuild will go from adding nearly 1 per cent to GDP growth due to accelerating building work to subtracting from GDP growth due to decelerating building work."
Eaqub said the surprising softness of inflation - 1.6 per cent in the year to June compared with an average of 2.7 per cent during the expansion phase of the 2000s - reflected a patchy economic recovery. "There are hotspots of inflation in parts of the economy where the price-setters have the power to do so," Eaqub said.
"Examples include government charges on tobacco and local authority rates. There are hotspots in housing, due mainly to the Canterbury rebuild, which has also increased insurance premiums.
"But prices are falling for imported and technology-intensive segments like TVs and internet. Some of these falls recorded in the CPI reflect significant quality changes - larger data allowances for internet, for example - which does not necessarily free up money from the weekly family budget."
NZIER says the election campaign has not led to big policy announcements.
"The economic risk is from policies extracted by junior coalition partners, which can be more extreme."
Population gain may be lower
The population gain from net migration may be smaller than Statistics New Zealand's monthly tally indicates, says the NZIER.
Last week, Statistics NZ reported a net inflow of permanent and long-term migrants of 41,000 in the year ended July, not far short of the all-time high of 42,500 recorded in the May 2003 year and well above the 20-year average annual gain of 11,700.
But in its latest Quarterly Predictions put out today, NZIER says that when it compares the 2006 and 2013 censuses, the increase in the resident population was smaller, by around 10,500 a year, than natural increase and the cumulative net flow of immigrants based on the monthly migration data would imply. The latter are based on the forms departing and arriving air travellers fill in.
"This does not mean the cycle in net migration is different, but perhaps that the magnitude is quite a bit lower," said NZIER principal economist Shamubeel Eaqub. "This may explain why rents are not rising rapidly, typically the first indicator of population pressures."