Fonterra's infant formula has no botulism risk

A ministerial inquiry into the crisis is still to be carried out, but MPI would step up regulatory oversight in production plants in the interim.

Fonterra chief executive Theo Spierings said Fonterra had originally commissioned independent testing from the government's AgResearch institute, one of only two research facilities in New Zealand capable of carrying out testing for Clostridium botulinum.

"On the basis of the results we received from the AgResearch tests, we had no choice but to alert regulators, and announce a global precautionary recall with our customers," Spierings said in a statement.

Spierings acknowledged there had been confusion and anxiety arising from the complexity of the precautionary recall and apologized for it.

The opposition Green Party said the MPI report threw up a whole layer of new questions into how the "fiasco" developed.

"Why was the bacteria wrongfully identified in the first place? And given that the original test showed Clostridium botulinum, why was it allowed to continue to progress into the infant formula food chain?" Green Party co-leader Russel Norman said in a statement.

"Why was MPI able to test the product for the bacterium in less than a month whereas it took Fonterra three months and it now seems that they came up with an incorrect result?" he said.

"This new twist in the story is further evidence that we need strong regulations, and can't leave this sort of monitoring up to private companies."

The main opposition Labour Party's primary industries spokesperson, Damien O'Connor, said government cuts to the MPI had led to a failure to ensure the highest standards of testing, monitoring and auditing.

"This fiasco continues to be a disaster for our clean, green brand. The inability of the ministry's systems means our reputation is always at risk," O'Connor said in a statement.

"If New Zealand is to be the exporter of the world's finest goods, it needs testing systems of the highest quality."