Economic activity is holding up, despite falling dairy prices and gloomy market sentiment.

Business confidence is at a three-year low as dairy prices continue to slide.

But Westpac senior economist Michael Gordon said economic activity has held up in the March quarter.

"The end of last year was probably the peak rate of growth, but it's still been trucking along reasonably well to date."

Market pessimism isn't expected to damp GDP in the June quarter either, as the effects of farm droughts and the suspension of oil drilling wear off.

But Mr Gordon warns New Zealand investors may be putting too many eggs in the housing basket.

Mr Gordon said the growth may be a bit too housing-centric.

"That may not be entirely positive - hence, some of the moves you've seen against trying to curb the excesses in the Auckland housing market."

House prices and construction are on the rise - and home lending had the sharpest rise in seven years.