File photo. Photo: RNZ / Rebekah Parsons-King
The economy is likely to be a "slow grind" over the coming months, according to ASB's latest quarterly economic forecast.
That was due to interest rate pressures and "some pockets" of increasing living costs.
However, with strong migration and growth in some sectors, inflation was on track to fall below 3 percent.
The forecast said weak household spending would be a theme in the short term, with the economy feeling the effects of reduced spending.
But ASB chief economist Nick Tuffley said there were some positive signs.
"We're continuing to see inflation decrease slowly, now on track to fall below 3 percent by the end of this year and maintain our view that the Reserve Bank (RBNZ) has finished lifting interest rates despite market speculation in February over further hikes," he said.
ASB continued to expect the RBNZ would begin cutting the official cash rate (OCR) from November.
The OCR has been at 5.5 percent since May last year.
Strong migration and some "optimism" in the rural sector had supported the economy "stay the course", Tuffley said.
"Dairy prices have recovered to such a degree that an $8 per kilogram milk price for this season and next looks achievable. The tourism recovery continues, though more gradually now," he said.
"That said, Kiwi households are still doing it tough with consumer spending reducing as New Zealanders tighten their purses for discretionary spending, such as recreation and liquor, in favour of experiences, like travel and accommodation."
Tuffley said while employment levels remained flat, rising migration meant it was becoming harder to find a job.
In terms of housing, ASB said the market had turned the corner, albeit an "unspectacular" recovery.
"Lower interest rates, favourable tax changes, and still-booming migration will increasingly boost the market over time," Tuffley said.