Prime Minister John Key says Australian consumers will miss out if they stop buying Kiwi products.
Some New Zealand companies are crying foul after two big Australian supermarkets axed their contracts to supply home-brand products in favour of Australian produce.
Mr Key raised the matter with Australian Prime Minister Tony Abbott in Sydney yesterday.
Mr Abbott says it's a commercial issue and has launched an inquiry into the supermarkets.
Mr Key told TV ONE's Breakfast the moves are to the detriment of Australian shoppers.
"In the end it's the Australian consumer that will eventually say you know what, I want a New Zealand product because it's better.
"The number one selling white wine in Australia is a New Zealand Sauvignon Blanc."
He said the reality was that the supermarkets were only doing it with home-brand, and said he will not be encouraging New Zealanders to pick Kiwi products over Australian products in response.
The Prime Minister said Mr Abbott is actively encouraging New Zealand companies to be involved in the inquiry.
"There's a million things that we do with Australia and like any relationship which is that tight and that broad and deep there will always be one or two issues".
Coles and Woolworths say they are giving their customers what they want - Australian-made produce and Australian jobs.