Two of the country's biggest lenders are warning households are taking on too much debt.
Westpac Bank said New Zealanders were throwing caution to the wind by taking on too much debt at a time when the main factors driving the economy were unsustainable.
The household debt to income ratio is now 162 percent, which is higher than in 2007 before the Global Financial Crisis.
Westpac chief economist Dominick Stephens said the economy was being propped up by strong population growth, the Canterbury rebuild and debt-fuelled spending amid rising house prices.
He said those three things could not last forever and, as a result, house prices could start to stagnate or fall in 2018.
"Households have taken on a lot of debt in recent years. At present with low interest rates that's sustainable. Thing is, if interest rates rose or the economy took a knock those elevate debt levels would be tougher to sustain," he said.
At the moment, this was an "orange flag and something to be wary of" rather than a red flag.
"Those who are benefiting from some of these key drivers of the economy at the moment should bear in mind that sustaining growth through increasing debt levels cannot go on forever," he said.
ANZ chief economist Cameron Bagrie said he was starting to see signals that should put the economy on "amber alert".
But the country was in a much better position now than what it was before the last downturn, he said.
Debt was higher than before the Global Financial Crisis, but due to low interest rates it was more easily paid off, he said. The current account was 3.5 percent of GDP and net external debt was 60 percent of GDP.
"Credit growth is running high, but it's at 8 percent as opposed to 10 or 12 percent, so there are some signals that have got us on notice," he said.
A correction was not immediately pending, but if the trends continued for the next two years, then the likelihood of a correction would increase, he added.
Mr Stephens said the economy was now in a new phase of the economic cycle.
"Growth is being challenged by the dairy downturn and the levelling off of the Canterbury rebuild."
He said that was being partially offset by service sector activity, rapid population growth, and burgeoning construction activity in Auckland as well as "a few other hotspots.
"But the real kicker for growth in the current phase is debt. Households have thrown caution to the wind, and a borrow-and-spend dynamic has emerged amid rising house prices," he added.
He warned that debt-fuelled growth was not sustainable.
"For that matter, neither is the Canterbury rebuild or rapid population growth, both of which we expect to taper off."
Mr Stephens expected the New Zealand economy to enter a phase of slower GDP growth, beginning around 2018.
The economy expanded by 2.5 percent in 2015. It was forecast to grow by 2.7 percent this year and 2.6 percent in 2017.
"While those are healthy rates of growth, they mask a mixed outlook across the economy."
Mr Stephens said economic growth might start to wind back in 2018.
Low interest rates spurred on by Auckland house prices had prompted Westpac to raise its property price forecasts. It now expected nationwide prices to rise 10.5 percent in 2016, up from 6 percent previously.
That was encouraging more households to take on more debt, which was serviceable now given interest rates were low.
"However, if interest rates do rise materially in the future, today's house prices will start to look less supportable and debt levels will be harder to service - both of which could result in marked deterioration in economic activity," he said.
"At that time, we would expect to see interest rates and the exchange rate falling, while house prices stagnate or fall."