"Select committees have very wide-ranging powers, they can subpoena people to come and give evidence in the House, they can look into any range of matters that they determine is appropriate through their terms of reference,'' he said.
"Certainly they've got the capacity to ask all of the players the right questions, make their own decisions and analysis about whether they think there is a competitive and fair market for New Zealand consumers and I guess, ultimately, make recommendations.''
Mr Key yesterday said he was concerned a select committee inquiry could "cut across'' the work of an inter-departmental group looking into raw milk prices and indicated it should be "highly directed at where it makes sense''.
The select committee itself would determine the terms of reference and call for submissions.
Committee chairwoman Lianne Dalziel today said she was hopeful hearings could be held and a report presented to Parliament ahead of the election.
There were many issues to look at and not much time, she said.
"I'm hoping that the terms of reference can be relatively broad and then we can narrow our focus as the issues come to the fore.''
She agreed there could be crossover issues with the inter-agency review, but it was important to get the issues into the public arena.
"The officials are looking at specific elements of that pricing pathway, but they are also doing that behind closed doors. I think the public would like some public scrutiny applied and that is what the select committee can do,'' she said.
The committee could make recommendations to Parliament but did not have the power to change laws, she said.
"But I think the most powerful element of what we can do is to put everything into the public arena and give it the scrutiny it deserves.''
Asked about National's support for the inquiry, Ms Dalziel said the Government often made decisions it was going to be forced into anyway.
"I was not confident last week that we would get the inquiry. That certainly has been turned around,'' she said.
"I believe that the weight of public pressure had a lot to do with it as well, there were lots of people calling for an inquiry.''
The ACT Party said it supported the inquiry but priority should be given to ``getting rid of bad government policies that drive up costs''.
MP Hilary Calvert said people wanted transparency around the milk price but the real issue was the cost heaped on farmers by red tape and bad government.
Federated Farmers said a new inquiry was ``premature and confusing''.
Dairy chairman Willy Leferink said the organisation would put up the farmers' case, and there was nothing to hide.
"It seems we're going into another milk price inquiry because, over five years, milk prices increased 7 percent higher than inflation,'' he said.
"On that basis, we should hold select committee inquiries into council rates, government spending, the emissions trading scheme and even replica sporting gear.''
- NZPA
