Consumers shouldn’t expect to see the cost of their weekly shopping drop as inflation eases, despite what some in government say.

In late August, Finance Minister Katy Gallagher told ABC Radio she expected to see grocery prices drop as inflation eases.

“As those costs moderate, you would hope to see some of the prices moderate,” she said.

“As we see those causes of inflation moderate, you would expect to see prices go down.”

Australia, like most of the world, is coming off a period of heavy inflation caused by the Russian invasion of Ukraine, the after effects of the COVID-19 pandemic and consumer demand.

Flavio Macau, associate dean of business systems and operations at Edith Cowan University, said there is a possibility that fresh produce may drop in price because of a good winter crop, but consumers are unlikely to see any other savings on their weekly grocery bills.

“Food that comes from distant places, food that is based on international market prices and food that comes from overseas, I would be a little bit more sceptical,” he said.

“We had a really hot summer with heatwaves in Canada, in the US and in Europe, and that brought down the yields by a substantial amount in some places.”

Overseas markets directly influence the prices of even some Australian-produced food like wheat and grain, even if they are sold domestically.

Michael Whitehead, director of Agribusiness at ANZ, said consumers are likely to see fluctuation in food prices in the near future.

“There are so many seasonal fluctuations, you see them mostly in fruit and veg, and in meat to a degree,” he said.

“If there’s a shortage of the fruit we have to get in from overseas, then prices go up.”

How prices have risen

In April, a report from investment bank UBS found food and grocery prices at Coles and Woolworths increased 9.6 per cent in the past year, despite the pair posting a $1.1 billion and $1.62 billion profit respectively.

Mr Macau said the major supermarkets may see the current climate as an opportunity to recoup profits after a “tightening” during the COVID-19 pandemic.

“You have a very concentrated market where you have about three supermarkets, maybe four that dictate the rules,” he said.

“They had to lower their profits to keep prices from exploding a few months ago. For them it is an opportunity to make a little bit more profit than they did in the past.”

Woolworths’ profitability, or operating margin, rose from 5.3 per cent to 6 per cent during the past financial year in its Australian food division, the highest margin recorded for the supermarket giant.

Mr Whitehead said grocery prices depend on a range of factors that are often difficult to forecast.

“An interesting one is avocados. They really fluctuate in price,” he said.

“When we saw a whole lot of them on the market, then prices really went down at the supermarkets.”

The price of avocados has fluctuated heavily in 2023. Photo: AP

According to the Australian Bureau of Statistics, there was a 15.2 per cent rise in the cost of dairy and an 11.2 per cent rise in the cost of bread and cereals.

Potential for further rises

Mr Macau said there are two major factors that could lead to higher food costs in the near future.

“One is oil prices, because if they escalate further then that will have an effect on the entire transportation chain,” he said.

“The other is keeping an eye on extreme weather events, as we’ve had quite a good time in regards to weather in Australia.”

Australia is expecting a run of hot summers and potential bushfires as climate patterns change and the earth feels the effects of human-caused warming.

Mr Macau said if Australia experiences severe drought or a really hot summer, people shouldn’t expect good news.

“If we continue to see typhoons and floods taking place across the globe, they’ll bring instability to the market,” Mr Macau said.

“That could again raise the price of food.”