A farm consultant says the cost of irrigation in traditionally dry regions is making New Zealand's dairy industry significantly less competitive internationally.
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The government announced last week a $1.6 million in funding for three irrigation schemes in Gisborne, Hawke's Bay and Wairarapa from the Irrigation Acceleration Fund.
Peter Fraser of Ropere Consulting said New Zealand's dairy industry grew out of the low cost of production, but the cost of expanding the industry into traditionally dry regions using irrigation has driven costs much higher.
"Now, New Zealand prided itself in the past on being low-cost producers, and this is why the Europeans and North Americans are wiping the floor with New Zealand, because they are the ones with low cost systems - not us."
New Zealanders would be shocked to learn, he said, Ashburton was the second-highest electricity user in the South Island behind the Tiwai Point aluminium smelter.
"All of that electricity is not going on big screen TVs or anything like that - it's going on irrigating farmland to produce milk at a loss, to export overseas."
"The issue that we really need to look at is that as soon as you go to irrigation you have a very high-cost system.
New Zealand was the only dairy-exporting country cutting production at the moment, and that was because costs of producing milk here were so high, Mr Fraser said.