Prime Minister John Key says the Government will assist farmers as best it can after the latest fall in global dairy prices.
The latest slump at the GlobalDairyTrade auction has seen prices fall 63 percent from this time last year.
Mr Key says farmers are a resilient bunch.
"I'm much more optimistic over the longer term, but it does feel as if they're going to be a little lower for longer than we would want. Every 10 cents that comes off has quite a big impact on the economy."
One suggestion he has for farmers is to consider other sources of income.
"If dairy prices stay at these levels globally for a period of time, you'll see quite an adjustment in the dairy sector. Some parts of the world will change out of dairy and switch back into more profitable areas now, like beef."
Labour says the Government has been too complacent, and needs to start diversifying the economy.
"It is just over a year since Steven Joyce arrogantly dismissed a potential five-year global dairy glut when I raised it with him on The Nation," says finance spokesperson Grant Robertson.
"This kind of complacency is reckless in the extreme. New Zealand is good at producing raw commodities, and we should be proud of that. But we know that is not going to be enough to sustain the quality of life we want for our families."
Mr Key says farmers who don't want to change direction will have to sit tight and ride it out.
"Unfortunately it's just a period where having come off very high levels, now we're asking our farmers to actually go through a period of very low levels. All we can do is try and assist them as best we can, and not to load them up with any more costs than are absolutely necessary."
Some banks are forecasting Fonterra's payout to farmers will fall below $4 per kilogram of milk solids, well below the break-even point of about $5.70.
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