Finance Minister Bill English says soaring migration is "the right kind of problem to have" as thousands of Kiwis a month return home across the Tasman.
Net migration figures for July show that 4500 more people arrived in New Zealand than left, the highest net gain since February 2003.
For the year ended July, net migration was 41,000 - close to the all time high of 42,500 back in 2003, and economists expect the record to be smashed in the coming months.
While the gains came mainly from India, China and the UK, once again migration to Australia was remarkably low, with the net loss of just 100 Kiwis, almost unchanged from the 20 in June, Statistics New Zealand figures showed.
On Wednesday, John Key joked that he probably knew the names of those who crossed the Tasman in June.
Unemployment in New Zealand is now down to 5.6 per cent. The unemployment rate in Australia has blown out to 6.4 per cent, July figures show.
The unexpectedly rapid climb in migration is placing pressure on the housing market and school rolls, but English insisted it was a problem New Zealand welcomed.
"People can see reasonable prospects here with falling unemployment and rising real wages [while] prospects in Australia are a bit uncertain as you're seeing rising unemployment, significant redundancies in the mining sector and [in] the last couple of months, a drop in real wages," English said today.
"It creates some pressures but they're the pressures that are welcome and they're pressures we can handle. It's the pressure of an economy that needs to produce new jobs to absorb there greater numbers of people, and a housing market that needs to deliver more houses more quickly on the ground, but they're the right kind of problems to have.''
It was possible, albeit unlikely, that there would be a net inflow from Australia in the coming months, although English acknowledged that migration was running faster than expected.
The pre-election economic and fiscal update forecast delivered on Tuesday forecast net migration of 42,500, but Westpac predicts it will hit 50,000.
"That's why it's so important we get the housing market working and that we retain confidence through an election so businesses keep investing so they can employ more people," English said.
He hoped Australia's economy improved soon.
"New Zealanders who go there, go there to get jobs. And when they see that's getting harder, they're staying home.
"We would hope that the Australian economy will stabilise and pick up because then New Zealand does better, and we welcome the pressure to have good enough performance in the New Zealand economy to keep people here."
Arrivals of Australians were at the highest levels for decades, Westpac economists said.
Australian job prospects were not expected to improve much before early next year.
"We expect net immigration to peak around 50,000 early next year," Westpac said.
With recent falls in fixed-term mortgage rates, the migration boom may support a revival in the housing market in the next year.
That was likely to be temporary as the Australian job market would probably bounce back and interest rates in New Zealand would probably continue to rise next year.
There were more migrants coming in on student visas, which probably reflected an easing in work restrictions for foreign students last year, Westpac said.
In the latest year, New Zealand had a net loss of 7300 migrants to Australia, well down from 29,200 a year earlier.
Net gains were recorded from most other countries, led by India (7700), China (6600), the United Kingdom (5500) and the Philippines (3100).
Compared with the July 2013 year, the biggest increase in visa type for arriving migrants was student visas (up 4800).
Migrants from India and China most commonly arrived in New Zealand to study, while migrants from the UK and the Philippines most often arrived to work.