Economic Development Minister Steven Joyce has defended the Government's record on investing in research and development.
Manufacturers say the Government must do more to support local industries and stem a steady loss of manufacturing jobs.
On Monday, Norwegian company Norske Skog announced plans to halve newsprint production at its pulp and paper mill in Kawerau - hard on the heels of job loss announcements at Southland's Tiwai Point aluminium smelter and at Solid Energy's Huntly and Spring Creek coal mines in Waikato and on West Coast.
Mr Joyce told Radio New Zealand's Morning Report programme on Tuesday the Government is already paying 20% to 50% of companies' research and development costs amounting to $120 million a year.
He said jobs may be created with new investment in biofuels in Kawerau where Norske Skog plans to shut down half operation at the Tasman Mill early next year.
Mr Joyce said newsprint is in decline and the company wants to manufacture closer to the bigger newsprint markets while also investing in other areas.
The minister said manufacturing went up in the last quarter and big companies are recruiting.
Business New Zealand says the Government would be forced to choose which jobs to save and which to abandon if it started subsidising industry.
Chief executive Phil O'Reilly said subsidies across the Tasman have made Australia's industry less competitive and less productive.
Earlier, Farra Engineering chief executive John Whitaker from Dunedin said the state of the manufacturing sector is disturbing.
Mr Whitaker said the Government's focus is elsewhere and is not looking out for manufacturers - unlike the Australian government.
The Forest Industry Contractors Association said subsidies must be introduced to prevent more job losses.
The Employers and Manufacturers Association said most manufacturers are struggling.
Labour says the Government cannot say the solution to job losses at Kawerau is biofuels when it cancelled a minimum biofuels requirement.
Economic development spokesperson David Cunliffe said there are many policy tools that could ease volatility in the exchange rate and help lower the average level over time.
Mr Cunliffe told Morning Report the Government needs to sit down with different industries in each region to discuss what it can do to help.