New Zealand's 4.4 million cows are providing 26 per cent of New Zealand's exports, and the money earned flows right through the economy to urban communities, according to a report commissioned by Fonterra and Dairy NZ.

A $1 rise in the cooperative's milk payout makes every kiwi $270 better off by boosting real incomes, the New Zealand Institute of Economic Research report says.

"The report will enable New Zealanders to better understand that when dairy does well, New Zealand does well," Fonterra chief executive Andrew Ferrier said.

"Most people understand dairy is a key export. Now they can understand what it means for them as the report accurately quantifies for the first time, the tangible benefits to both rural and urban communities."

The report said that of the $7.5 billion dairy farmers received in 2009, $3.8 billion was spent on domestically produced goods, including fertiliser, feed, agricultural services and financial services.

"There is no doubt that dairy has helped us out of the recession and the benefits extend well beyond the farm gate," Ferrier said.

"Export growth from the dairy sector has helped narrow the current account deficit and that helps everyone through lower interest rates on mortgages and other borrowings."

The report states that dairying directly employs 35,000 people, and a further 10,000 contractors.

Dairying's influence extends well beyond its direct impacts in dairying areas, with the sector closely intertwined with the rest of the economy said NZIER deputy chief executive, John Ballingall.

"That includes the jobs it delivers, the income that these workers earn, its links to supply firms, the effects of rural economic growth on urban centres and the tax revenue it provides to fund public services."