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In previous years, New Zealand outperformed on the economic global stage.
Solid rates of GDP growth encouraged high levels of net migration. In turn, demand strength was reinforced.
More recently, momentum in domestic activity had faded and conditions in other economies had firmed.
``We expect the New Zealand economy will continue to underperform its peers for the next few years. This will have important implications for both net migration and the New Zealand dollar.''
Westpac highlighted in recent weeks New Zealand's economic cycle had entered a more mature phase, he said.
Early drivers of growth, which included house prices and construction activity, had now moved into new phases and were providing less of a boost to economic activity than previously.
Annual GDP economic growth had cooled to 2.9% at the end of last year and recent updates on economic activity indicated growth had continued to soften in the early part of this year.
Retail spending was softer in the March quarter, rising by only 0.1%, although it rose 0.4% in May, according to Statistics New Zealand figures released yesterday.
Construction activity had fallen and had been flat for about nine months, Mr Stephens said.
Home building had been trending sideways since mid-2016, pre-dating any uncertainty associated with the change in Government.
It likely highlighted the brake capacity constraints and difficulties accessing finance were having on building activity, regardless of the large pipeline of planned work, he said.
The changes in New Zealand's relative standing in the global economy would have some important implications.
One key area to be affected was net migration. In recent years, favourable economic conditions and jobs growth made New Zealand an attractive destination.
There was a strong lift in new arrivals and more New Zealanders than usual were encouraged to remain onshore or come back from abroad.
Those factors meant annual net migration rose to a record high of 72,000 in mid-2017, pushing the rate of overall population growth above 2% a year.
``This provided a powerful boost to demand and our product capacity, reinforcing other factors supporting growth.''
Net migration had been slowing, although it was still elevated to 67,000 in the year to April, Mr Stephens said.
It was expected to slow substantially during the next few years as the New Zealand economy started to lag its peers like Australia and the US.
General softening in economic growth would be exacerbated. There would be smaller additions to the demand base as well as reducing the degree of pressure on hew home building - at least outside of Auckland, he said.
The exchange rate was other area where the New Zealand economy's underperformance would really matter.
The NZD/USD was back to about US70c and was expected to fall to about US64c in the coming year.
Strengthening US conditions were likely to mean the US Federal Reserve gradually raised its funds rate. Economic conditions in New Zealand would keep the Reserve Bank on the sideline for some time yet, Mr Stephens said.