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Cost of living or cost of production?

On the up: Transport costs, supply chain disruptions and input costs are all affecting food prices. Photo: AAP Photo by AAP

Media commentary on the five per cent consumer price index rise has been focused on some food categories, but the official statistics point to other major contributors.

The CPI figures released by the Australian Bureau of Statistics show food prices increased by less than the total CPI index, at 4.3 per cent.

Commentators were quick to point out that this was the highest year-on-year increase in food price inflation since 2011.

But other sectors were contributing more to the CPI rise. Transport price increases recorded an annual rise of 13.7 per cent, education 4.7 per cent, housing 6.7 per cent and household furnishings 4.9 per cent.

The media has been reporting rises in sub categories of food prices, which include fruit and vegetables at six per cent, dairy at four per cent and meat at six per cent.

Improved farm gate prices for dairy, lamb and grain may be contributing to the increased retail costs, but farmers are also looking forward to better returns after being on the end of downward cycles in recent years.

Rabobank senior analyst Michael Harvey said consumers should be bracing for further food price rises in coming months, as the impacts of higher transport costs, supply chain disruptions and other increased input costs make their way through the system.

Meanwhile, global dairy prices have dipped slightly in recent months.

The current tight global supply outlook may be only short term, according to ANZ’s latest agri commodity report.

Chinese demand dropping off has been the major factor influencing prices, as new COVID-19 outbreaks and lockdowns across China have caused supply chain delays and lower demand.

ANZ’s head of institutional food, beverage and agribusiness Tash Kemp said the drop in demand wasn’t expected to be long-term, as the overriding demand and supply factors were supporting strong prices.

“The Ukraine conflict, which has led to large jumps in fuel, feed and fertiliser prices, has also led to skyrocketing prices and without any sign of a conclusion being reached that upward pressure on dairy prices is expected to continue,” she said.