Not happy little Vegemites:food prices rising faster than inflation

Inflation for grocery staples from peanut butter to pork chops is outpacing price rises for almost all other goods in the nation’s shopping trolleys,even pushing up the cost of Australians’ morning scrape of Vegemite.

Analysis by UBS’ consumer and retails research team shows food inflation is running at 9.6 per cent,well above the overall inflation rate of 7 per cent,with the shelf prices for goods such as Vegemite up 8 per cent,Bega peanut butter up 9 per cent and some types of yoghurt up 12 per cent.

The cost of a scrape of Vegemite on your morning toast has climbed by 8 per cent over the past year.

The cost of a scrape of Vegemite on your morning toast has climbed by 8 per cent over the past year.Alamy

But there are signs that prices for fresh food may be starting to ease,albeit remaining at an elevated level.

Cost-of-living pressures on Australians have intensified due to the combination of soaring inflation and increases in interest rates by the Reserve Bank aimed at bringing it down.

A survey of voters’ responses to the federal budget,conducted for this masthead by Resolve Strategic,found while many people backed measures such as energy bill subsidies and new Medicare spending,only 31 per cent believed the overall package was good for them and their households.

The UBS research,which tracks more than 60,000 prices of grocery products at Coles and Woolworths every month,found fresh food prices had climbed by 9.9 per cent in the year to April,while dry grocery goods were up by 9.4 per cent.

Prices for breakfast staples such as dairy goods and spreads have climbed 13 per cent over the past year.

UBS analysts said the country was facing “materially high food inflation” and it was starting to affect the buying patterns of consumers,with some switching their branded favourites for cheaper,no-name or house brand alternatives.

“Dry grocery inflation is likely to remain elevated as pressures on commodities and the domestic supply chain including labour continue in 2023,although the frequency of price rises may reduce,” the analysts found.

“High inflation has driven a shift to private label[goods] at Coles and Woolworths … with this trend likely to continue given rising cost-of-living pressures.”

Food and grocery inflation is running faster than general inflation.

Food and grocery inflation is running faster than general inflation.Supplied

There are some positives. UBS reported that while chicken prices had climbed 10 per cent over the past year,they had eased 1 per cent over the past month. Pork prices had dropped 4 per cent since March after a 10 per cent jump since April last year.

Some supermarkets have already noticed consumers moving towards cheaper cuts of meat or bulk purchases of certain foods because of high prices.

UBS also noted fresh food inflation was likely to ease in the coming months as supply levels of many products started to improve. Australian beef production was up 15 per cent in the March quarter,reaching a three-year high.

In this month’s budget,the government forecast inflation to ease from 6 per cent at the end of 2022-23 to 3.25 per cent by the end of next financial year.

Treasurer Jim Chalmers said the government was aiming to get wages growing to help offset inflation. Wage growth hit an 11-year high of 3.7 per cent in the year to the end of March.

He said inflation was starting to moderate,arguing the government had used the budget to help people where it could without increasing price pressures.

“We know that Australians are under the pump,we know that cost of living pressures are biting,and that’s why so much of the government’s focus over the first 12 months has been taking some of the edge off these cost of living pressures without adding to inflation,” he said.

But shadow treasurer Angus Taylor accused Chalmers of handing down a big-spending budget that was adding to inflation pressures.

“Middle Australia is hurting. The treasurer had one job in the budget,to reduce pressure on inflation,not increase it. The treasurer failed,” he said.

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Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.

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