Kiwis are not being ripped off when it come to the price of milk, Prime Minister John Key says.

Overseas markets were causing high prices for milk at home, Mr Key told Paul Henry this morning.

"A price war at the moment in the UK is causing that."

His comments followed accusations from former Labour leader David Shearer that New Zealanders were being ripped off, with milk prices higher here than in Australia and the UK, despite the amount of milk produced in this country.


"About two years ago when the price was really high we were told by the Ministry of Agriculture it was [because of high international prices]," Mr Shearer said on NewstalkZB this morning.

"Now the international price has dropped by half ... you would expect our milk price to go down, but it's actually gone up."

The Government needed to front up and explain why New Zealand milk prices were still high when in Australia and the UK they had dropped by 16 per cent, Mr Shearer said.

"Somebody's creaming it," he said.

"Domestic milk is perhaps being used as a means to recoup profit being lost by international prices."