More than 140 jobs will be lost in the Goulburn Valley town of Tongala in Victoria after food company Nestle's decision to stop powdered milk production, according to the Australian Broadcasting Corporation.

A further 84 jobs at the company's Tongala factory are also in question as the company decides whether to continue in liquid milk production, ABC said.

The move comes as New Zealand dairy company Fonterra consolidates its presence in Australia with a full takeover of the Bonlac group. Fonterra will also take over Nestle's milk suppliers in the Tongala area.

Campaspe Shire Councillor Neil Repacholi said the Nestle job losses are a devastating blow to the town of 1,200 people. "It's come at a bad time, we are in the middle of the severest drought the region has seen," he said. "The loss of 140 jobs, is a bitter blow to the town to swallow."

Nestle has indicated the jobs will be phased out in September.