The sobering reason your groceries are about to cost even more
One of Australia’s top economists has warned Australian consumers that grocery prices will keep climbing after the dramatic re-escalation in the Middle East conflict.
Reserve Bank of Australia (RBA) chief economist Dr Sarah Hunter spoke in Canberra on Wednesday, where she explained the ongoing war between the US, Israel and Iran would continue to impact the food supply chain from farming through to grocery distribution.
Australian consumers are being warned that food prices will keep climbing. iStockphoto
She said these “types of economic disturbances, or shocks” placed additional pressure on production, processing, and transportation costs, which were already under inflationary pressure before the start of the conflict in February.
Dr Hunter said the conflict was having a “broad impact across many parts of the economy” resulting in an increase in “global energy and related prices”.
The Reserve Bank says the war has impacted the food supply chain. iStockphoto
A fragile ceasefire the US brokered with Iran in mid-June collapsed this week.
The conflict between the US and Iran, which began in February, placed immediate price pressures on domestic diesel which is used to transport food from farms and production locations to supermarkets.
The price of fertiliser used on farms has also soared, which caused the price of production of grain, fruit, and vegetables to increase. About 50 per cent of Australia’s fertiliser supply comes from Middle Eastern nations.
RBA Governor Michele Bullock previously explained Australia was already grappling with inflationary issues when the war in the Middle East broke out, serving to worsen the situation.
“This oil shock that has been driven by what’s gone on in the Middle East, this has complicated things immensely,” she said in May.
Production, processing, and transportation have all become more expensive. iStock
“It’s made a trade-off for us much worse.”
Grocery prices in Australia have increased by an estimated 24 per cent between 2021 and 2025, according to the Australian Competition & Consumer Commission (ACCC).
This was due to inflationary pressures, increasing costs of production, and further exacerbated by what the ACCC described as misleading behaviour by the country’s two largest supermarkets, Coles and Woolworths.
Grocery prices in Australia had already soared ahead of the start of the war in Iran. Getty
This triggered legal action by the ACCC, which resulted in a finding in May that Coles had misled customers with some of their “Down Down” promotion.
The outcome of similar action against Woolworths is still pending.
