The latest Consumer Price Index data from the Australian Bureau of Statistics, released today, has revealed we are now experiencing the highest rate of food inflation since September 2006.
Today's ABS data shows headline CPI rose 8.4 per cent year-on-year, however there was a deceleration in increase in inflation.
Rabobank senior food retail analyst Michael Harvey said that was a sign Australia was nearing the peak, providing "a welcome breather for households".
"Turning to food inflation, there was also a sequential increase in food inflation - rising to 9.2pc in December 2022 quarter vs previous year," he said.
However, Mr Harvey said the rate of increase did slow in food also.
"Nonetheless it is the highest rate of food inflation since September 2006," he said.
Since 2000, food inflation has only hit double-digits once. And again, it was broad-based with inflation recorded across all food and beverage categories, Mr Harvey said.
"The highest rate of inflation was recorded in cooking oils and is continuing to track at record levels," he said.
Overall, in food (excluding beverages, alcohol beverages and foodservice) there were 15 categories of 26 that posted double-digit rates of inflation. Across staple food items there was also record levels of inflation in milk, bread and snacks and confectionery.
Mr Harvey said there was a slowdown in inflation across both fruit and vegetables.
"And for fresh produce more favourable growing conditions and less production disruption will be key to future pricing," he said.
In other news:
Food inflation (year-on-year) in restaurant meals and takeaway posted 6.9pc and 7.8pc increases, respectively. This was slightly higher than the previous quarter.
Mr Harvey said while these are rates below the headline food inflation number - the cost of eating out is rising at its fastest rate since March 2001 (two decades).
"Eating out continues to be more expensive for Aussie families," said Mr Harvey.
"Pressure on Aussie households is still growing given the rate of inflation and expectation of further interest rate rises to come.
"Pressure on the ability and willingness for consumer spending is still very evident."
But Mr Harvey said there was good news for consumers with the peak in food inflation expected to be close.
"It is unlikely we will see deflation across some staple categories such as packaged food an dairy given food manufacturers are passing through higher costs," he said.
Mr Harvey said global energy prices - and commodities more broadly - were down sharply over the past six months but this would take time to feed through to consumer prices.
"The peak in RBA policy rates have also shifted recently. Markets are expecting rates to fall modestly before the end of this year with a peak close to 3.6pc," he said.
"And falling house values feeds back through wealth effects into consumer confidence adding to the pressure on households."
In more good news, Australia is still expecting to avoid recession.
"The local economy will be boosted by the re-opening of the Chinese economy - but with risks - at a time when we are seeing a synchronised global slowdown," Mr Harvey said.
"Australian November retail sales, which was 1.4pc m/m, beat expectations but we expect to see a hit to discretionary spending in H1 2023 and this may impact food sales to some degree".
