THE supermarket giants have been given the green light to continue with aggressive discounting, as the Federal Government yesterday paved the way for more to come.

The Government's final response into two major Senate inquiries into cheap milk has shelved further review into competition and consumer law and deferred the issue to the consumer watchdog - which has already given the discounting the go-ahead, reported The Courier-Mail.

It comes just days after Coles and Woolworths stepped on to a new battlefield, slashing prices of fruit and vegetables as farmers warned any attempt to drive down farm-gate prices could be fatal for the industry.

The Government yesterday handed down its response into two successive Senate Economics Committee inquiries into the dairy industry, first launched in 2010.

While shoppers have won out in the milk wars and are still paying just $1 a litre more than a year after prices were first slashed, farmers and independent grocers have continued to cry foul over predatory tactics.

Australian Dairy Farmers board member Adrian Drury said Queensland farm-gate prices for milk had dropped 4 cents a litre since shelf prices were cut, adding that the dairy industry had been "let down" by the Government.

"Most politicians publicly say they want farmers to be treated fairly but don't do anything about it because they don't want to upset consumers," he said.

The Senate Economics Committee used a broad brush to dismiss the concerns of farmers nationally, but warned Queensland producers could face career-ending hurdles.

Yesterday the Government response to the committee shrugged off industry concerns as commercial matters for the market to deal with.

The response also rejected a review of competition and consumer law until the Australian Competition and Consumer Commission tests current laws more broadly in the courts.

Coles issued a statement last night saying it remained "committed to lowering prices" and would create sustainable partnerships with farmers and food manufacturers.

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