Winston Peters

The plummeting Fonterra forecast milk solids payout threatens an economic storm, New Zealand First leader Winston Peters says.

The New Zealand dairy cooperative yesterday announced it was dropping its forecast $4.60 per kilogram of milk solids to $4.15.

• Dairy income cut $800m

Mr Peters said the nation would suffer from this further hit.

"Our Government has done less than nothing to help provincial New Zealand, which is the foundation of our export wealth. Historically, this must be the worst National government for farmers and with the chickens coming home to roost, they're paying the price for what is now a party dominated by city slickers.''

The solution always was to focus on exporting dairy products, not at the minimum added value but maximum added value, such as the infant formula industry which, in less than three years, had slipped from New Zealand to Chinese control, he added.

Labour finance spokesman Grant Robertson said Fonterra's news came a day after Fitch ratings revised New Zealand's near-term growth prospects downward because of declining prices for dairy exports and on the same day the Reserve Bank said dairy prices remained a risk.

John Key's Auckland-focused announcements on infrastructure spending would not be well received in regions mostly reliant on dairy farmers succeeding.

Despite more than a year of warnings as dairy prices plummeted, there had been no effort from the Government to invest in job-rich industry and support companies to move up the value chain, he said.