After two years of inquiries, hearings and submissions the Government has agreed in principle to seven recommendations and noted 24 out of a total of 31.

The Government has rejected calls from a Senate inquiry for it to strengthen competition regulation and make it easier for farmers to bargain with the big retailers.

The Government's response to last year's Senate inquiry into milk pricing and a 2010 inquiry into the dairy industry was released early this month.

The Government says the Australian Competition and Consumer Commission are able to deal with any pricing issues, and cited its finding that "there is no evidence that Coles has acted in breach of the act in relation to milk discounting".

It said it was premature to review new provisions of competition law until they were tested in the courts and said that arrangements for farmers to negotiate collectively with dairies were working effectively.

Australian Dairy Farmers President Chris Griffin said the Government was avoiding taking action despite conclusive evidence of impacts on dairy farmers.

"They are hiding behind the ACCC, which has time and again proven itself to be ineffective and powerless against the tactics of the major supermarkets," he said.

"ADF is amazed that the Government is satisfied with the ACCC's 'monitoring' when it admitted in evidence to the Senate Committee that it had "not done any monitoring of the other items" in reference to the 15,000 other items in a supermarket that Coles may be increasing the price of to offset the price cuts on staples such as milk.

"The ACCC also admitted that it had not checked if Coles was selling below cost in regional areas such as Darwin, Kununurra and 'other far flung places'."

Griffin said the industry demanded action and once again called for an enforceable and mandatory Code of Conduct for supermarkets that covers the entire value chain, from farmer to retailer.

The industry also calls for a supermarket commissioner or ombudsman to be established to investigate complaints and strongly enforce the new code.

"The price cuts are unsustainable and the plain fact is milk priced at 1992 levels does not bring in enough money to support farmers, processors and retailers in the year 2012.

"The evidence shows it and Coles knows it," Griffin said.

WAFarmers Dairy Section President Peter Evans said the ACCC had repeatedly proven to be ineffective and powerless against the tactics of the major supermarkets, yet the Federal Government is continuing to hide behind the ACCC.

"The Federal Government has failed to recognise the difference between exports based states such as Victoria and primarily domestic consumption states such as Western Australia.

"We call on the Federal Government to explain how 'the future sustainability of the dairy industry across Australia depends to a large extent on its ability to remain competitive in a global dairy market' within a Western Australian context."

Independent research in Western Australia shows that the reduction in the milk price to $1 per litre and subsequent transition to private label products removes $25.2million from the dairy supply chain on an annual basis.