An influenza pandemic could cost 3700 lives and put 20,000 more people in hospital, research commissioned by the Ministry of Health shows.
The Director General of Health, Dr Karen Poutasi, said the predictions reinforce the need to take the illness seriously and continue preparations to deal with a major outbreak of flu.
The research, published in the latest New Zealand Medical Journal, says a flu pandemic could also see more than a million New Zealanders needing to visit a doctor, placing added strain on the health system.
Dr Poutasi said the figures were sobering but no surprise because concern about a pandemic of bird flu or a similar type of flu had been mounting worldwide.
"Nobody can be sure where or when it will emerge, but the ongoing H5N1 bird flu outbreaks in Southeast Asia have the experts concerned. We need to act prudently and responsibly in continuing to prepare," she said.
The World Health Organisation said last month that up to 100 million people could die within weeks if a bird flu pandemic broke out.
The strain of bird flu known as H5N1 has killed 47 people, who appear to have caught it from chickens and other poultry.
Fears are that H5N1 could mutate into a form that could pass between humans. So far, there has been no evidence that mutation has occurred. The only previous probable case of human-to-human transmission happened in Thailand, where a mother died after cradling her sick daughter in her arms for hours.
Dr Poutasi said it was important to strike a balance between making people aware of the seriousness of a flu pandemic and preventing panic.
"The biggest assurance is that we have done the planning. There's no magic solution."
The ministry announced in February that it was stockpiling more than 800,000 doses of an antiviral drug that could be used to treat 20 per cent of the population in the event of a major bird flu outbreak.
Dr Poutasi said the new research, conducted by public health experts Nick Wilson, Osman Mansoor and Michael Baker, was part of the ministry's "ongoing" preparation for a pandemic which included a national pandemic plan developed in 2002.
The researchers used a computer model developed by the US Centres for Disease Control and Prevention to estimate the impact of a flu pandemic on the local population and the health sector.
They cautioned that the model assumed no public health interventions to control disease spread, such as the use of a vaccine or antiviral drugs.
They also said the biological characteristics of a new pandemic strain of flu made it unpredictable, meaning death toll predictions could be much less - or much worse - than the model's predictions.
The model estimated that 1600 New Zealanders would die if 15 per cent of the population became ill in a flu pandemic. That increased to 3700 with an incidence of 35 per cent.
The death toll would still be less than ministry estimates for annual deaths due to poor diet (about 8500), tobacco (5000) and cholesterol (4700), the researchers pointed out.
However, they said hospitals would be overwhelmed in a pandemic. They recommended rapid action at the start of an epidemic (such as cancelling elective procedures) to free hospital resources.
Dr Don Simmers, the incoming deputy chair of the New Zealand Medical Association, said in the worst-case scenario as described GPs would be overwhelmed and forced into a "siege mentality".
"They would have to shut down a number of services to meet the demands of people who were very unwell and possibly going to die."
But Dr Simmers said if a pandemic occurred measures to contain the spread of the flu would kick in. Health authorities were likely to have warning of any virus that made its way to New Zealand and could, for example, quarantine people.
Counties Manukau security manager and emergency response planner Mick Hubbard said it was difficult to say if hospitals in New Zealand could cope because they lacked experience on that scale.
But district health boards had been refining a national pandemic plan and there were measures that could be put in place to try to manage any outbreak.
What is a pandemic?
* A much bigger, more serious version of an epidemic. The term pandemic refers to a disease which spreads over a large geographical area - sometimes worldwide - affecting a high proportion of people.
* The great pandemics of last century were the 1918-1919 Spanish flu, the 1957 Asian flu and the 1968 Hong Kong flu, which together killed about 50 million people.