Economic data shows food and beverage prices still rising faster than long-term average, even as inflationary pressures ease
High food prices are now embedded in the economy, a retail analyst has warned, after new inflation data released on Wednesday.
Egg prices surged 11% last year, and the cost of cooking oil is up 7%; lamb prices have jumped 17%, while shoppers are paying about 6% more for fruit and vegetables. Beer prices have lifted by 4%.
Even as the worst of the inflationary pressures subside, increases in food and beverage prices are still outpacing long-term averages, according to Australian Bureau of Statistics data, and there is little relief in sight.
Rabobank’s senior food retail analyst, Michael Harvey, said steeper food costs were becoming ingrained in the economy, and will be an “ongoing” reality for people.
“We don’t see another wave of price increases coming through, but there’s also no sign of decreases; there’s not a lot of downward pressure,” Harvey said.
“Cost of living pressure is not new, and it’s ongoing. Consumers will need to continue to respond to the high food prices in terms of their purchasing decisions.”
Australia’s consumer price index fell to a lower-than-expected 2.4% in December, according to the ABS annual figures released on Wednesday, prompting the federal government to declare the “worst of the inflation challenge is behind us”.
But there are still pockets of the market getting much more expensive.
The food category jumped 3% in 2024, although the increases aren’t uniform. While the price of dairy products has fallen slightly, the price of cooking oils continued to soar, up a cumulative 40% over the past few years.
Some food prices have been affected by specific issues, such as the avian influenza impact on eggs, which have prompted supermarkets to impose purchase limits.
Cocoa prices have been elevated due to production issues in west Africa, leading to steep price rises in confectionery. Lamb prices rocketed last year, but that increase came off a low base after they plunged in 2023.
Harvey said higher prices get “embedded” because production costs have risen due to increased inputs like fuel, fertiliser and wages. There have also been higher packaging and distribution costs for manufacturers.
“Food companies have passed through those high costs to consumers,” he said. “It’s also about margin recovery and just reflecting the fact that things are still expensive to produce.”
Many food manufacturers and supermarkets have used the inflationary period to recover or even expand their profit margins, especially in sectors with limited competition such as Australia’s tightly held supermarket sector.
Rabobank analysis shows the rate of annual food price increases is still running above the 10-year average.
The founder of food rescue group OzHarvest, Ronni Kahn, said even people with jobs and mortgages were turning to the organisation because they could no longer afford to buy life’s essentials.
“It’s a new demographic for us,” she said.
“We’re seeing nurses, we’re seeing teachers, we are seeing people who’ve got jobs and who cannot make ends meet.
“State and federal governments absolutely need to recognise that there is a food insecurity crisis, and they have to increase funding to food relief organisations like us so that we can help feed more people.”
Kahn said fresh produce was in high demand, because it had become so expensive, while eggs can be hard to come by.
“We might just put eggs into little cartons of four or six, and try to match need with demand. But again, we certainly don’t have eggs every day.”
