John Key: We are not immune from the fall out from Greece

Protesters are seen through a burned European Union flag during an anti-austerity demonstration in Greece. Photo / Bloomberg

Prime Minister John Key says the Greek situation underlined his view that the biggest risk to New Zealand's economic growth came from overseas markets.

"The domestic stimulus is still strong - Christchurch rebuild, Auckland housing issues, just generally, tourism across the country has been very, very strong - so I've always thought the biggest risk is international and this is a factor.

"The only good news part of the story is that a fall out of Greece from Euro would have been much more significant a few years ago than it is today. But we are not immune from it, the Dow Jones industrial index was down nearly 2 per cent over night...the Kiwi is continuing its slide."

Key said it was possible the Greek developments could have "a little" impact on commodity prices, including dairy.

"Although the negative news in dairy is quite factored in. I mean, if you talk to Fonterra they'll probably tell you they see potentially a little bit more bad news for a few months, but overall they think they are getting near the [price] bottom."

Asked if he believed the Greek crisis was fuelled by egotism from the country's leaders, Key said he did not, and the situation facing the Greeks was very challenging - with either path a painful one.

"Ultimately if they decide to pull out of the European Union then that will have a dramatic impact in terms of a new currency that would be constituted in Greece, obviously the drachma would be back at a fraction of what the Euro was, it's my guess.

"That's great for their exports and people who would want to come and have a holiday in Greece. But equally they would have all of their lending taps turned off and the question would be, could they fund themselves going forward? If they accept the package that's put together it's more years of austerity and fundamental change to the way Greece operates. So neither of these situations are easy."