Dairy Australia has estimated that overall milk production for the 2014-15 production season will reach 9.3-9.5 billion, up 2 per cent on the previous season.

February's report also revealed that the ongoing volatility in world dairy markets had done little to stem investors' growing interest in Australia's dairy industry.

"Favourable international trade deals, such as the China Free Trade Agreement at the end of last year, have added to dairy's appeal as an attractive investment opportunity," Dairy Australia commercial research and analysis manager Norman Repacholi said.

"While most major international dairy markets have seen steep price declines, Australian farm-gate prices have remained steady and this can partly be explained by the nation's processors who are eager to maintain farm sector confidence to encourage growth in milk production.

"Other factors, such as the Australian domestic market, decline of the Australian dollar and fall in oil prices are helping to insulate the sector.

"But farmers should remain on their guard as the international dairy market can change rapidly as global supply outweighs demand."

Mr Repacholi said that, nationally, consumer sentiment had remained tilted towards pessimism despite most major dairy categories showing better retail growth.

Cheese and dairy spreads had moved to higher average prices and consumer spending on dairy products at cafes and restaurants remained healthy, he said.