Treasury says the economic recovery is likely to remain subdued because of weak domestic consumption and easing export sales.
It says early indicators such as retail sales point to prolonged weakness in private spending in the June quarter, as households focus on reducing debt.
It also notes that exports have declined on the back of lower dairy exports.
But even with weaker-than-expected growth, and concern about debt levels among developed nations, Treasury says the local economy will continue to gradually expand.
Analysts are picking the economy to grow about .8% in the June quarter.
On an annual basis, it's picked to expand by about 3% in each of the next two years. Treasury has forecast growth of 3.2% in the year to March 2011.