How cost of living increases affect your grocery shopping basket

Dollarydoos don’t stretch as far as they used to, hey? With cost of living and inflation rapidly on the rise, grocery shopping has become one of 2022's biggest expenses. 

A price-jump in food is arguably a bigger pain for consumers than outrageous petrol or housing costs, since out of all the non-discretionary items in our monthly budget, food is absolutely essential and non-negotiable. 

In fact, the most recent ABS report on Living Cost Indexes shows that all major Australian income groups were deeply impacted by climbing food & beverage prices – especially low-income households.

So how much more expensive is food in Australia these days? And what can we do?

While prices can vary between stores and regions, most Australians have noticed their decreased purchasing power during grocery shopping trips. 

“It personally feels like I am getting less bang for my buck,” says Mozo writer Maria Gil, our resident expert on bank accounts and budgeting. 

While she can usually order a month’s supply of food online for less than $200, Maria’s previously adequate budget just doesn’t cut it these days. “We just did groceries [less than two weeks ago], and now we’re running low on everything.”

Despite not changing stores, her lifestyle, or her grocery list, Maria noticed a dramatic uptick in her monthly checkout total. In fact, her average spend in the last four months of 2021 was roughly $28 cheaper than the first four months of 2022.

The most dramatic price changes in her invoices were for the cost of vegetables and dairy, despite her habit of buying locally and in season.

Maria’s experience is by no means unique. According to the ABS , vegetables (+6.6%) and fruit (+4.9%) saw significant price hikes last quarter, primarily due to COVID and flood related supply chain disruptions, as well as high transportation and fertiliser costs. Meat and seafood also rose 4.8% due to shortages. 

Even the cost of grain has risen 65% year-on-year in the last quarter, according to the Australian Food and Grocery Council. Since Australia exports roughly 90% of its wheat, global demand partially drives this massive inflation. Eventually, we’ll see flow-on effects for items dependent on wheat crop production like bread, beer, and pasta. 

Overall, even when adjusted for seasonal fluctuations, the cost of basic food groups has risen 2.0%.

It’s important to point out that rising grocery prices don’t matter so long as wages go up as well. However, Aussie wages have stagnated significantly for the past ten years, and the pandemic hasn’t helped matters much. A 5.1% spike in the Consumer Price Index (CPI) this quarter just doesn’t offset a dismal 0.7% growth in March 2022 wages. 

“The CPI did not lie,” concludes Maria.

Key factors driving the prices hikes at your local supermarket include:

• Supply-chain disruptions. Rollover effects of the east coast floods, COVID-related staff shortages, added transportation costs, and global crises like the War in Ukraine don’t help matters in the slightest. Added logistical costs in getting food from farm to table therefore get passed onto customers.
  
• COVID-related staff shortages. Ahh, this ol’ chestnut. COVID continues to dog many businesses, with successive omicron waves sweeping the feet from under many essential service workers.
  
• Increased transportation, storage, and fertiliser costs. While soaring petrol prices affect everyone on the roads (including truckers and delivery drivers), spikes in oil also affect energy bills for cold-storage and the cost of plastic packaging materials. Fertiliser has also become a surprisingly major expense for Aussie farmers, mostly thanks to limited supply against surging demand.

Bigger bills for groceries have already forced many Australians to change their shopping habits. New research from Toluna reveals that 1 in 4 Aussies plan to switch supermarkets or downgrade brands for a cheaper alternative, with nearly a third forgoing eating out or ordering takeaway altogether to cut costs.

So outside of brand-switching, shopping at cheaper outlets, or buying in bulk, how else can shoppers save money? 

• Order online. This can be a great way to manage your spend, and new research shows consumers could save up to $1,360 annually by ordering online groceries. Compare some of the best online shopping through our Mozo Experts Choice Awards.
  
• Subscribe to a meal kit service. While nontraditional, meal kit services can provide a stress-free, strictly budgeted way of getting your weekly shop’s worth of groceries. Most even come with pretty easy recipes inside!
  
• Buy locally and in-season. Buying fruit and veg grown locally in Australia still will go a long way to reducing grocery expenses. You could spring for a curated seasonal box, or imperfect picks from local stores like Harris Farm. Since meat and seafood have also run away (in price, that is), try out your local butcher’s for some better deals as well. If it doesn’t have to be imported, it’ll likely be way cheaper at the checkout!

For more tips, check out our money-saving shopping guide.

Rising costs got you stressed? Check out 10 easy ways to handle price hikes, or browse a selection of high interest savings accounts below to pad out your nest egg. Don’t forget to design a budget!