Slower food price inflation, but key categories still heading up – Rabobank commentary

Annual food price inflation slowed to 3% in the June 2025 quarter, the latest quarterly Consumer Price Index (CPI) data, from the Australian Bureau of Statistics, has shown. This is down from 3.2% year-on-year food price inflation recorded in the March 2025 quarter.

The easing in food price inflation followed the trend seen in overall headline inflation, which came in at 2.1% on an annual basis, down from 2.4% in the March 2025 quarter.

Inflation in the out-of-home food service category was stable at 2.7% when measured on a yearly basis.

RaboResearch senior food retail analyst Michael Harvey said despite the easing in retail food price inflation seen in the latest quarterly data, food price inflation was still running above the 10-year average, “indicating persistent cost pressures in the food ecosystem”.

In particular, he said, there are some categories which are likely to draw the attention of consumers due to sharp price increases, and these may drive shifts in purchasing behaviour.

“The price of eggs was significantly up, with the rate of price increases accelerating and running at 19.1% higher year-on-year,” he said.

“Consumers will also be watching coffee, with prices increasing annually by 9.4% in the June quarter and this was compared with annual inflation in coffee prices of 3.8% in the previous (March 2025) quarter.”
 

RaboResearch senior food retail analyst Michael Harvey

Mr Harvey said lamb prices were 12.1% higher year-on-year, but the rate of inflation had slowed when compared with the March quarter (19.7%).

Cooking oils, cereal products and seafood were the only three categories to post deflation (price declines) for the quarter on a year-on-year basis.

“But there will be a ‘watch’ on cooking oils for Australian households”, Mr Harvey said, “as this category includes butter, and global butter price are hovering at or near record levels again and likely to put upward pressure on local prices given Australia is a net importer of butter.”

Fruit and vegetable prices rose 4.6% in the 12 months to the June quarter. This was down from a 6.6% annual rise in the March quarter. “This is a sign of more stable seasonal growing conditions,” Mr Harvey said.

Consumers will also be watching the snacking and confectionery category, he said, with prices up 5.5% cent in the past 12 months. This was as chocolate manufacturers passed through higher input costs, in particular cocoa, he said.

Milk and cheese prices were stable following two consecutive quarters of deflation previously.
 

Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 125 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 87 branches throughout Australia and New Zealand.