Dairy industry law changes 'inevitable': Minister

Agriculture Minister Damien O'Connor says new issues have surfaced in the dairy industry since the 2015 review which warrant widespread discussion.

Changes to the Dairy Industry Restructuring Act (DIRA) are "inevitable" following a comprehensive review of the dairy industry this year, says Agriculture Minister Damien O'Connor.

He was commenting on misinformation within the $12.4 billion export industry that the review he announced recently would be a lesser probe than a review which had previously been scheduled for 2020-2021.

The misunderstanding resulted in industry participants suggesting they would not bother making a submission because a more substantial review is coming later.

"The substantive review is this year ... and there will inevitably be changes to the legislation as a result of this review," he said. "It's a crucial industry and it's important that everyone that has a stake in it has input."

Terms of reference for the review, to be headed by the Ministry for Primary Industries, still have to be finalised and would be well-publicised to create the most robust debate possible, O'Connor said.

The last review of the industry was by the Commerce Commission in 2015-2016.

The new Government pushed through an amendment to DIRA this month so that Fonterra's muscle in New Zealand's dairy markets will continue to be managed, and to clear the way for the industry review this year.

DIRA was passed in 2001 to enable the creation of Fonterra from a big industry merger, to manage the farmer co-operative's dominance, and deregulate dairy exporting.

Without the amendment to DIRA, Fonterra, which still collects 82 per cent of the country's raw milk, could have been freed from the Act's restrictions in the South Island this year because its competitors have enough milk supply to legislatively deem that market competitive.

O'Connor said new issues had surfaced in the dairy industry since the 2015 review which warranted widespread discussion.

One issue was the new reality that New Zealand's milk growth is flatlining and only expected to increase by about 2 per cent a year, compared to big annual growth in the past two decades.

"That wasn't considered through the 2015 review and indeed is one of the issues that needs consideration. People talk of a meat industry-type battle for milk and I don't think anyone wants to see a repeat of that."