The Ministry of Agriculture and Forestry said today it was investigating a possible threat of foot and mouth disease, but believed it to be a hoax.

The ministry said at a news conference it had quarantined a farm on Waiheke Island.

The threat was made in a letter delivered to Prime Minister Helen Clark. A spokesman for Miss Clark declined to comment.

Police and Ministry of Agriculture and Forestry (MAF) officials at the news conference indicated that there was a reported deliberate release of foot and mouth disease virus on Waiheke Island.

Although police and officials are treating the report as a hoax, they said they were checking it out as though it was for real.

MAF director of biosecurity Barry O'Neil and Police Assistant Commissioner Peter Marshall said in a statement the claim, advised by letter to the Prime Minister's Office this morning, was probably a hoax but was being taken very seriously.

The letter writer threatened a further "release" in another part of New Zealand if particular actions were not taken by the Government by a certain day this week. The letter writer wants changes to the tax system.

Police would not say what day or where.

Mr O'Neil said MAF had activated its disease management response systems this afternoon after the letter was received.

"As part of this precautionary response a controlled area notice has been issued which restricts the movement of livestock and risk material on and from the island while the investigation proceeds.

"There are no restrictions on people travelling to or from Waiheke Island."

Risk materials include live animals, hay, equipment used with animals, untreated products from animals, milk, cheese, meat and wool.

Mr O'Neil said the notice took effect this afternoon. He stressed the importance of securing the full co-operation of everyone in the area in dealing with the situation.

Mr Marshall called on anyone with information that might help to contact their nearest police station immediately.

Senior ministers and officials had been briefed and a police inquiry into the origin of the letter had been launched.

"While this matter is probably a hoax we must take all necessary steps to safeguard New Zealand's interests and public welfare," Mr O'Neil said.

As a precautionary measure, New Zealand was taking steps to advise key industry participants in New Zealand and overseas of this claimed foot and mouth virus release.

Foot and mouth disease is the biggest biosecurity threat New Zealand would face. It is a virulent virus that spreads among domestic animals and would seriously affect the economy.

More than six million animals were culled in Britain during an outbreak of the disease in 2001, which devastated the country's livestock industry and cost the economy an estimated £8 billion ($20.9 billion).

New Zealand's economy is more dependent on agriculture and would be worse hit than BRitain. Many of New Zealand's $30 billion of exports would be affected.

The New Zealand dollar dipped briefly on the news of the report although it was not seriously buffeted and held above US73c.

Dealers said they had been reassured that the alert was likely to be a hoax.