It appears to base this on the confidence-sapping effects of persistently weak dairy prices.
"Annual consumption growth appears to be close to average despite high house prices, low interest rates and relatively strong growth in real labour incomes. In per capita terms consumption growth has been weak," the bank says.
Nevertheless, it expects the household saving rate to remain negative - with households spending more than their disposable (after-tax) income - until 2018.
The absence of a wealth effect may be a fair interpretation of the nationwide data.
But it does not hold true for Auckland, where house price inflation is especially rampant.
In the March quarter, core retail sales, which exclude the automotive sector, were up 9.7 per cent on the same period last year.
That is a stronger increase than can be explained by population growth plus income growth.
The bank acknowledges that a risk to its central forecasts is that house price inflation remains high for longer than it assumes. For instance, it might be wrong to assume the migration gain is peaking about now.
If that higher house price inflation translated into stronger growth in household consumption, in keeping with historical relationships, the increase in domestic demand would require a higher track for interest rates, the bank says - about 0.6 percentage points higher by the end of next year.
The flipside of record low mortgage rates is rapid growth in household debt. Overall, credit is growing not just faster than the economy (nominal GDP) but twice as fast. That is not good.
Research by the Bank for International Settlements published last month found a strengthening link, especially among advanced economies, between rapid credit growth and financial crises.
"This could reflect the greater susceptibility of liberalised financial systems to generating credit boom-bust cycles that translate into greater financial fragility. Such instability may also be due in part to low inflation regimes underpinned by central bank credibility and global disinflationary forces," the report concluded .
"In such regimes, unsustainable economic and financial expansions appear to manifest themselves not primarily in inflationary pressures, but instead in excessive credit growth and asset price booms that ultimately usher in financial crises." Measured against the size of the economy, household debt is back at the heights last seen in 2009.
The Reserve Bank says rapid credit growth is of more concern if the level of credit to GDP is already elevated.
Much the largest part of bank credit is mortgage lending to the household sector, driven by runaway house price inflation. The stock of residential mortgage debt grew 7.9 per cent in the year to April.
The average loan as of April was $145,000 and 61 per cent of mortgage debt was either at floating rates or fixed for less than a year.
That ought to give the official cash rate a decent amount of traction, but only to the extent the banks pass any changes in the OCR on to borrowers.
The OCR is only one influence on the banks' cost of funds, however.
As retail interest rates, including deposit rates, have declined over the past year, so has growth in deposits.
ANZ chief economist Cameron Bagrie warns that the current pace of credit growth relative to deposit growth is not sustainable. "The former needs to slow and the latter to lift. In a market such as New Zealand where there is a limited saving pool banks must look offshore to close the gap."
Credit spreads - the risk premium offshore providers of wholesale funds demand - are above their average for the past three years, notes Bagrie, who expects competition among the banks for deposits to ramp up in the second half of the year.
The average loan as of April was $145,000 and 61 per cent of mortgage debt was either at floating rates or fixed for less than a year.
"As older, cheaper funding is replaced by newer, more expensive funding banks' average cost of funds will lift." Some 29 per cent of the money a New Zealand home buyer borrows from a New Zealand bank represents the imported savings of foreigners.
As an aside, while there is a tendency for eyes to narrow and lips to curl at the idea of a growing share of the housing stock being owned by non-residents, consider this: non-resident buyers are at least putting equity at risk; in the event of a housing market crash, non-resident savers, like New Zealand depositors, will still expect to be repaid.
Relative to household disposable incomes, household debt is at a record high of 162 per cent.
Ultimately, mortgages and rents have to be paid out of incomes, the lion's share of which is wages and salaries.
The March quarter's labour market statistics recorded annual growth of 4.8 per cent in total weekly gross earnings (the combined effect of more jobs and higher wages). Average weekly earnings were up 2.1 per cent.
Such figures suggest the debt to income ratio is continuing to get more top heavy.
