Food prices ease on some supermarket staples

According to the latest quarterly consumer price index (CPI) data, released last week by the Australian Bureau of Statistics, there has been a slowdown in the rate of overall food price inflation. RaboResearch Senior Food Retail Analyst Michael Harvey said this meant consumers had seen the smallest annual rise in food prices in the latest quarter since Q4 2021. However, he said, food costs remain high, with the rate of annual food price inflation still marginally above the 10-year average of 2.7%.

The December 2024 quarter data saw the annual rate of food price inflation (comparing prices with the December 2023 quarter) come in at 3%. This was down from a year-on-year inflation rate of 3.3% for overall food prices recorded in the September 2024 quarter. This easing was in line with the trend seen in overall headline inflation in the Q4 2024 CPI, which annually had fallen to 2.4% (from 2.8% annual inflation recorded in Q3 2024).

“Inside the basket, there was deflation seen in some food items — with prices going down in breakfast cereals (albeit up in bread and cakes), the dairy aisle and some meats,” Harvey said. “An increase in promotional activity across these categories is likely a key driver of these lower prices.”

Harvey said in terms of higher food prices, a spike in lamb prices stood out. “Lamb prices jumped 17% in Q4 2024 compared with the same period in 2023; however, this was off a ‘soft comparable’ as lamb prices had slumped annually by 15% in Q4 2023,” he said.

For consumers, the prices of eggs and cooking oil continue to be pressure points, Harvey said, stating, “Eggs rose 11.2% year on year and cooking oils rose a further 7.5%.”

Harvey said it was “no surprise” confectionery prices were also shown to still be rising. “This has been triggered by high cocoa prices, which rallied in the second half of 2024, with manufacturers passing through the significantly higher cocoa bean prices to customers,” he said.

Harvey said seasonal conditions would be a key watch for their impact on fresh produce prices in the next few months.

Rabobank Senior Market Strategist Ben Picton said in terms of broader inflation, the Q4 result was weaker than the RBA’s forecasts and the expectations of most market economists. “There was important progress in key categories like rents, insurance costs and new home construction costs. Services inflation remains elevated, but appears to have resumed its downward trajectory,” he said.

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