Agriculture Minister David Carter says the government has ordered a Select Committee investigation into the price of milk to determine whether New Zealanders are paying a fair price.

Mr Carter says the government has decided to act now after the Commerce Commission ruled it wasn’t the right body to investigate the issue.

“The Commerce Commission decision last week actually raises as many questions as it answers. So the government is quite supportive now of a Select Committee inquiry to try and ascertain whether the pricing to New Zealanders is fair and reasonable.

"And I personally believe that the Select Committee wants to look very carefully at the retail space in trying to find the answers.”

Mr Carter says the government has been working closely with Fonterra on its Trading Among Farmers proposal and, as part of that, the current investigation by MAF, the Ministry of Economic Development and Treasury is focusing closely on the farmgate milk price.

“The Select Committee will have an opportunity to look at that aspect of pricing but also the other three stages. And that is the price at which milk leaves a Fonterra factory, the price of wholesalers then providing it to retailers, and ultimately the retail price.”

However Federated Farmers has criticised the move saying the Select Committee milk pricing inquiry is premature and confusing.

Federation dairy chairperson, Willy Leferink, says it would have been wiser for the government to wait to for the outcome of the multi-government agency inquiry that is already underway.

David Carter says while he appreciates Federated Farmers concerns, he says the multi-government agency investigation is just one small part of the overall milk price picture.

He says he hopes the Select Committee investigation will finally answer the million dollar question – are New Zealanders paying a fair price for their milk.