Food prices decline in June quarter
The price of food fell by 0.9% in the June quarter but still maintained a lofty 4.8% rate of inflation for the year to June.
The food group fell in all capital cities and offset rises in most other categories measured by the ABS.
The major catalysts for decline were vegetables (-6.9%) and fruit (-7.6%), both of which benefited from peak growing seasons and favourable weather patterns. Removal of a tax on milk and a weakened dairy environment contributed to a 3.0% fall in milk prices. Partially off-setting price falls were take away and fast foods (+1.1%) and restaurant meals (+0.8%).
Over the twelve months to June quarter 2009, twenty three of the twenty six food categories rose to ensure a 4.8% rise across the food group. Increases occurred in all capital cities and were mainly driven by general price rises in take away and fast foods (+5.7%), restaurant meals (+4.1%) and fruit – which still rose 7.7% for the year despite the substantial fall in prices this quarter.
Food commodity prices indicate further price declines ahead
The Westpac-NFF Commodity Index this week showed a 12.7% decline in the price of key food commodities, signalling that lower prices could be seen for a few more months to come given the time lag between lower commodity prices and lower grocery prices. The National Farmers Federation believes the lower prices are unlikely to last, however, as trends seen before the financial markets crashed begin to return.