Opposition leader Andrew Little says Labour will consider forcing banks to pass on cuts in the Official Cash Rate (OCR) to customers if they did not respond to a "stiff-arming".
Mr Little's comments come after several of the main banks only cut their interest rates on loans by a portion of last week's 0.25 point cut, down to 2.25 per cent.
Mr Little said if Labour was in government it would start with "pretty serious talking" with the banks.
"And if they are not responsive to that you've got to look at your options. I mean you're in government, you have the power to legislate. I wouldn't rule it out and if we did it, it would be with great reluctance and a heavy heart."
He said the banking sector had been very profitably through good and bad. "I think, frankly, they can do better for New Zealand."
If the Government's expectation was for banks to pass on drops in the OCR to lenders, it should make that very clear "and be very firm about it and should remind banks that it does have powers the banks don't have".
Finance Minister Bill English said there was an expectation the banks would pass on those cuts, but that could take time. Primary Industries Minister Nathan Guy said farmers would be watching how the banks responded to last week's cut.
"Right now farmers will be watching this space very closely. What tends to happen in a situation like this is public pressure builds and that's something the banks will be very very mindful of."
He said interest rates were at a 50-year low and farmers were "fortunate" that it was so low. "I'm sure in time that will flow through to the banks."
Mr Little also called on the banks to show "forbearance" towards farmers struggling to cover their mortgages because of the low milk price.