Corrections Minister Judith Collins says she will leave it to the incoming Cabinet to decide whether a proposed men's prison in Wiri, south of Auckland, should go ahead.
The 1000-bed Wiri Prison would be the Government's first full-scale public-private partnership.
Three consortiums are vying to design, build and run the $424 million men's prison, which was given approval by a Board of Inquiry from the Environmental Protection Authority in September.
The latest sector forecast shows that the prison population of 8700 in June this year is predicted to drop to about 8160 by June 2021.
Ms Collins says it is premature to speculate on the future of the prison at this point and the only decision for now is to proceed with the tendering process.
The Green Party says the forecast slump in the prison muster is proof that the project should be dumped.