'Families should be seeing cheaper prices': Govt puts supermarkets on notice

As the pressure mounts on Labor to do more to ease the living cost pressure on households, Prime Minister Anthony Albanese has flagged the possibility of imposing conduct standards on retailers as part of a government review of the Food and Grocery Code of Conduct.

Mr Albanese said his government wants to make sure consumers get the benefit of lower food costs.

"If the price for meat and fruit and vegetables is going down at the farm gate then families should be seeing cheaper prices on supermarket shelves too," Mr Albanese said.

"Supermarkets have a duty to make sure they're providing affordable options for all Australians, especially when they're making savings on their own costs."

The prices charged by supermarkets, particularly for meat, fruit and vegetables, has come under increasing scrutiny amid concerns that falling wholesale prices are not being passed on to consumers.

The wholesale cost of lamb has tumbled almost 20 per cent in the past year as supply has surged while improved growing conditions and easing input costs have helped push down prices for everything from potatoes and onions to oranges, carrots and tomatoes.

Growth in the prices paid by consumers has slowed in the past year but there is concern that retailers, particularly the big supermarket chains, are using their dominant position in the market to gouge both suppliers and consumers.

Food price inflation as measured by the Australian Bureau of Statistics has slowed from an annual rate of 9.2 per cent in late 2022 to 4.8 per cent in the September quarter.

But monthly inflation figures show the retail cost of cheese, butter and other dairy products was still growing at 7.8 per cent in October, while bread was up 8.5 per cent and meat and seafood almost 2 per cent.

Claims by the major retailers that they are passing on lower costs to their customers have been met with skepticism, not least because of their large profits and market power.

Woolworths has 37 per cent of the grocery market and reported a net $1.62 billion profit last financial year, while Coles has a 28 per cent share and had a net profit of $1.1 billion. Smaller players Aldi and Metcash had market shares of 11 per cent and 7 per cent, respectively.

Woolworths' profitability was boosted by a 6 per cent spike in the operating margin of its food division, sparking criticisms that it has been pumping up its profits at the expense of shoppers and producers, a claim it has rejected.

The government said it would use "all available levers" to ensure businesses were passing lower costs on to consumers.

Last year it launched a competition review and a separate examination of the Food and Grocery Code of Conduct, which sets voluntary industry standards for dealing between retailers, wholesalers and suppliers.

On Tuesday night Mr Albanese announced the appointment of former Labor minister and Hawke government economic adviser Craig Emerson to lead the food and grocery code of conduct review.

Treasurer Jim Chalmers said the government was having "a fresh look" at the code to "make sure the sector is giving consumers and suppliers a fair deal".

The government warned the review may result in an overhaul of the voluntary code and the introduction of mandatory standards.

Specifically, it said may result in a shift from industry-led codes and consumer protections to "government mandating requirements and consumer complaints handling".

It said it would also consider "strengthening consumer rights in key sectors where market dominance leads to unfair pricing".

But Nationals leader David Littleproud was critical of how long it had taken for the government to appoint a person to head the review.

Mr Littleproud said the review had been without a leader for 100 days "while families and farmers continue to be ripped off at the checkout and farmgate in a cost-of-living crisis".

The Nationals leader called for the Australian Consumer and Competition Commission to launch its own inquiry into supermarket pricing.

Dr Chalmers said he was "in regular contact" with the ACCC about supermarket pricing and would be meeting with ACCC chair Gina Cass-Gottlieb about the issue this week.

"We expect all companies to treat Australian consumers fairly," the Treasurer said. "When the price of meat and fruit and veggies comes down for supermarkets, it should come down for families as well."