Cheaper food buys as inflation bites
THE rapid increase in food prices at the supermarket has accelerated to more than 8 per cent, reflecting decadeshigh inflation rates for both fresh and packaged foods, with the rising cost of living pressure on shoppers pushing more into filling their baskets with cheaper canned and frozen foods.
And while spending remains resilient for now among consumers and there is some optimism around Christmas, once the realities of steeper mortgage payments, rising energy bills and more expensive petrol is factored
in that spending at supermarkets is expected to see a strong push into cheaper home brand groceries.
It comes as the leading supermarket chains Woolworths and Coles unveil over the next few weeks their firstquarter trading which is expected to shed more light on the impact of food inflation, the lead up to Christmas and pressures on household budgets.
A new report on the supermarket industry and food prices from investment bank UBS has revealed that food inflation for the first quarter of fiscal 2023 accelerated to 8.3 per cent at Woolworths
and 8 per cent at Coles. That was up sharply from food inflation of 5.6 per cent in the final quarter of 2022 for Woolworths and 5.5 per cent for Coles.
“Food inflation is expected to reach 8.7 per cent over the next 12 months,” warned UBS analyst Shaun Cousins.
“Generally this is as high as I have seen certainly in the last decade, this is the highest rate of inflation that Australian consumers would have seen for many years.”
The spike in food prices is adding extra pressure on household budgets already buckling under rising interest rates and cost of living pressures.
And the cost of basic foods would have been much higher if it wasn’t for Woolworths and Coles offering discounts and promotions at their stores.
There’s no relief in sight for skyrocketing grocery prices that are expected to remain elevated well into 2023.
The dire findings by UBS were drawn from around 60,000 weekly prices across Woolworths and Coles and promotional activity at the two supermarket leaders that together account for the majority of groceries bought in Australia.
The UBS survey found that on average across both supermarket chains food prices spiked 8.2 per cent with the cost of fresh food leaping ahead by 9 per cent in the first quarter against 5.7 per cent in the fourth quarter of 2022.
The cost of packaged or dry groceries rose 7.7 per cent for the first quarter, up from 5.5 per cent in the fourth quarter.
“Promotions are still occurring, but the quantum of inflation coming through the system is such that you cannot not pass it on, you can’t hold it back,” Mr Cousins said. “Promotions will continue and remain important, also locking down prices and price freezes.”