Farmers and the dairy industry have welcomed the Government's announcement of an expanded fund to help get new irrigation schemes flowing.
The Government is allocating $35 million over five years in this month's Budget for an irrigation acceleration fund, to help promoters of schemes get to the stage of seeking investors.
The fund replaces and expands on a community irrigation grant scheme that has run its course.
But Agriculture Minister David Carter says the Government is going further by proposing to become an investor itself in the construction of large-scale schemes.
He the Government will consider investing up to $400 million in the regional irrigation schemes in the future, but will not commit to that amount in this year's budget.
Mr Carter says NZIER research suggests the acceleration fund could support 340,000 hectares of new irrigation, which could boost exports by billions of dollars a year.
The irrigation initiatives are part of a water policy package released by the Government on Monday.
It also includes include a national policy statement on freshwater management and a new Clean Up Fund to help councils with historic pollution problems.
Federated Farmers says 97% of New Zealand's water flows wastefully into the sea, and should instead be used.
But environmentalists say agriculture has already degraded water quality and threatened species, and boosting irrigation to intensify agriculture will only make it worse.
Simon Terry of the Sustainability Council says farming does not pay the cost of its greenhouse gas emissions now, and extending it via irrigation will worsen the problem.