Australia’s major supermarkets are facing a squeeze on their profit margins in coming years as public anger builds about grocery prices and governments help shoppers make savvier choices.

Woolworths and Coles have come under sustained criticism over supermarket bills and claims that prices on shelves don’t appropriately reflect what farmers are paid for their produce.

It has led to new funding for consumer group Choice to produce regular reports on grocery prices across the major chains, which retail expert Brian Walker says will help deliver lower prices.

That’s because when shoppers make savvier choices supermarkets will be forced into tougher competition with one another, helping to drive down prices to better mirror the costs of food.

“Prudent businesses will respond to that,” Walker said.

“When there’s a high cost-of-living environment, governments act in a regulatory way to help look at areas in which there might be some ability to provide short-term savings for consumers.”

The $1.1 million in taxpayer money for Choice will deliver reports on how grocery prices are changing across the major chains over time.

Walker said the big supermarkets are “very aware” of public opinion about their prices and will be making short-term changes to their strategies that could affect their margins in coming years.

But he stressed it would be a tactical response and wouldn’t necessarily deliver long-term structural changes to an “oligopolistic” market.

“There will be some short-term pricing strategy changes, perhaps,” Walker said. “Some margin changes and working harder with suppliers, or pushing harder.”

Woolworths and Coles have already moved to drop prices on some red meat products in recent weeks as public anger over their pricing has mounted, culminating in criticisms from Prime Minister Anthony Albanese, who has claimed the chains are shortchanging their customers.

Woolworths’ supermarkets posted before tax earnings of $2.8 billion for financial year 2023, while Coles recorded almost $1.1 billion in after-tax profits, according to public financial filings.

Experts have stressed that improving the transparency of grocery prices is a key step towards delivering lower costs for consumers as the ACCC prepares to probe into food supply chains.

JPMorgan analysts are also predicting a squeeze on profit margins for Woolworths and Coles in the coming years, warning in a report in The Australian on Tuesday that the industry is facing an uncertain outlook amid the ACCC investigation.

Another big factor will be easing food inflation, which peaked last year and has been coming down since, including staples such as red meat, fresh fruit and vegetables.

Woolworths Group chief executive Brad Banducci foreshadowed easing prices last week, saying inflation would continue to moderate throughout 2024, which should deliver relief for shoppers.

Australians will get updated information about the trajectory for grocery prices on Wednesday when the Australian Bureau of Statistics (ABS) publishes inflation figures for the December quarter.

Headline inflation is expected to fall following a moderation in prices for a range of essentials, including food.