Australian shoppers experienced record breaking price increases on essentials like milk, bread and fresh produce in the past year, new data shows.
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The shock of floods, war in Ukraine and supply chain issues resulted in high production and transport costs for domestic food producers, resulting in hefty price hikes in supermarkets.
Grocery prices rose 9.2 per cent in the past year, the Australian Bureau of Statistics said.
But experts say as international economic pressures begin to recede, shoppers can look forward to more stable prices on essentials like milk and bread this year.
According to research by financial comparison organisation Canstar, Aussie households were on average spending $608 a month on groceries in 2022.
Fresh fruit and vegetables
Fresh food production has predominantly been impacted by environmental events associated with the La Nina weather pattern that brought major flooding to northern Victoria and parts of NSW last year.
Crops impacted by the floods include stone fruit, grain, and wine grapes.
ABS reported that prices of fruit and vegetables were up 8.5 per cent in December 2022.
KMPG chief economist Dr Brendan Rynne told ACM the outlook for fresh and manufactured food is a stable price adjustment, with some upwards pressure, but not as much as over the last 12 months.
"That's going to resolve itself and in the absence of any other major natural disaster, one would hope the fresh food side of production in Australia will continue to improve, and we may see some prices coming back down as production ramps up back to full scale," Dr Rynne said.
He said consumers can look forward to fresh food prices coming down over the next three months.
Granny smith apples are currently 86 cents each at Woolworths and 83 cents at Coles. A Hass avocado will set you back $3.50 at both Woolworths and Coles.
Meat
ABS data showed that meat and seafood prices increased 8.2 per cent from December 2021 to December 2022.
The cost of meat and protein was exacerbated by operational costs including transport, wages, and energy, which all increased in 2022 as supply chain pressures and the war in Ukraine battered global energy prices.
Dr Rynne said petrol prices are anticipated to stabilise, if not decline over the short to medium term.
"Those transport cost pressures shouldn't be adding too much to overall cost of production," he said.
But meat prices may face more increases.
"Energy will have an influence on livestock, and processing of meats is also likely to be more expensive due to higher wages cost, but not excessive. You would expect prices growth to be 4 to 5 per cent in that realm."
At both Coles and Woolies you can get 24 thin beef sausages for $12.
Milk and dairy
Australian consumers are seeing significant price increases across dairy products. Milk prices have risen at the fastest rate since records began, according to Rabobank.
Dairy led the price gains in the December quarter, rising 14.9 per cent during the year to December 2022.
High milk prices have mostly offset major cost headwinds for dairy farmers such as fertiliser, fuel and feed.
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NSW Farmers dairy spokesperson Malcolm Holm told ACM that a price hike for milk was inevitable.
"The consumers had the benefit of that really low price for a good decade. That unsustainable price has risen to a much higher level but is probably still at the lower end of where it needs to be," he said.
"All of NSW and northern Victoria have been severely impacted by flooding and wet weather in the last 12 months. That's really impacted cow health, feed quality, and most importantly our staff its been really hard work.
"We're still producing a great product, a safe and nutritious product, but it's been under very trying conditions."
Two litres of full cream milk will set you back $3.10 at Coles and Woolworths.
In February Coles offered dairy farmers steep price increases under longer-term contracts in an effort to maintain supply for its private label milk and keep consumer prices steady until 2025.
"I'm not expecting to see dairy prices come back, because we know there were skinny margins anyway within that sector," Dr Rynne said.
"With additional operating costs hitting them like high energy costs, high water costs, high transport costs is was necessary for that sector to have that uptick in prices."
