New Zealand Prime Minister John Keys has said that he won't be subsidising the country's dairy industry despite dairy markets trading near a five-year low.

He says the New Zealand government prefers to invest in science and innovation, rather than directly supporting farmers, so as to ensure productivity amid declining dairy prices

In an interview with CNBC he said he won't be subsidising farmers in terms of directly propping up farms that don't make it.

"You would expect that if dairy prices stay lower then land prices would come back a bit. That's the natural economic equation that should play out.

Keys did say that New Zealand's dairy sector does have a significant impact on the country's exchequer.

"There is no question that it (price falls) will have some impact. We think of current dairy prices its a about a $6 billion on the economy and our gross economy is about $220 billion.

"So you can see that impact."

farmers Fonterra

Dairy represents a quarter of all New Zealand merchandise exports.

New Zealand is unique in that it exports 95% of the 19m tonnes of milk produced by New Zealand farmers.

‘We are not in the business of supporting inefficient dairy farms’

Closer to home the Minister for Agriculture Simon Coveney struck a similar note recently when he said dairy farmers thinking of expanding need to be efficient first.

[caption id="attachment_67184" align="aligncenter" width="728"]Minister for Agriculture Food and the Marine Simon Coveney Minister for Agriculture Food and the Marine Simon Coveney[/caption]

Minister Coveney told the Teagasc/ICOS dairy conference ‘The End of the Beginning’ that Ireland needs efficient farms before we get larger.

"We are not in the business of supporting inefficient farms.

“Farmers get that and I hope the banks get it too,” he said.