High immigration numbers have been "papering the cracks" of the New Zealand economy, analysts say, and now that they are dropping fast, it is likely to add to the slowdown.
Data on Wednesday showed the international migration rate fell to an additional 13 people per 1000 already here in the year to July, compared to 26 per 1000 in October last year.
Stats NZ population indicators manager Tehseen Islam said the rate last year had been the highest since the late 1870s.
Islam said 13 per 1000 was still high by international standards.
ASB senior economist Mark Smith said the rate was back to the level of early 2023, and there was a risk that net inflows of migrants would fall faster than expected.
This would subdue economic growth and meant the Reserve Bank potentially had more reason to cut interest rates, he said.
Kiwibank chief economist Jarrod Kerr said the drop in migration numbers had happened quickly.
A lot of last year's surge was due to pent-up demand from when New Zealand's borders were closed during the pandemic.
"We've seen that massive spike, but now it's coming off quite quickly, kind of in line with what we were forecasting."
BNZ chief economist Mike Jones said migration had "plunged".
"We've seen the economy go from a significantly weakened position to pretty much out for the count around the middle of this year. A good chunk of that reflects the fact we're not getting the same impetus from population growth."
He said it would make sense that people followed the opportunities available.
"If you look at our labour market and match it to what we're seeing in Australia, things are firmer there, the unemployment rate is lower and expected to rise more gradually than it is here."
This would mean New Zealand no longer had the boost that came from increased migration through the end of last year - even though it might not have felt like that at the time, he said.
"The macro numbers were weak but there was always that factor in the mix papering over some of the cracks, that's not there any more and is clear when you look at retail spending numbers, the rental market and housing market - it speaks to the fact we're not getting the impetus from population growth that we were."
Kerr said he had heard from businesses that some migrants who had arrived here were having trouble finding work.
"The ones that are still hiring are getting quite a disproportionate amount of interest. One client was telling me he advertised for an engineer and got 65 applicants - only 10 could do the job and the other 55, according to this guy, were migrants and they all sounded quite desperate.
"I think that marries in with what we're seeing in the data. The unemployment rate is lifting, job ads are declining and a number of migrants who came here are probably struggling to find the jobs they need."
There had been a mismatch between labour supply and demand, Kerr said.
"Two years ago, businesses were screaming out for workers and couldn't get them,,. all of a sudden the workers are here at the time when they're scaling back. It's bad timing, they've missed it by a year."
Migration numbers would continue to drop while the economy was weak, he said.
Many New Zealanders were migrating for better work opportunities offshore, he said.
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