Food prices in Australia are really going down

IN A remarkable reversal, Australian families are now enjoying the fastest-falling food prices in the developed world.

After unrivalled increases, local food costs declined by 2.7 per cent in the 12 months to the end of September, News Limited analysis of OECD data reveals.

"We can confirm that Australia had the biggest price decline of food prices in the recent past," Organisation for Economic Co-operation and Development spokesman Lawrence Speer said.

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Some of this most recent drop is due to fruit prices normalising after the effects of the Queensland floods of late 2010 and early 2011, the Victorian floods of January 2011 and Cyclone Yasi in February 2011.

However, the OECD data also shows that there is a broader and more sustained trend at work.

Since the end of 2009, Australian food prices have remained contained when compared to similar nations such as Canada, New Zealand, the UK and the US.

Between 2000 and 2009, Australians had endured the fastest-rising food prices among major developed nations.

Two of the significant factors in the turnaround, according to University of Queensland economics professor John Quiggin, have been the end of the drought - increasing supply - and the strong Australian dollar, which has helped to limit the cost of globally traded food ingredients such as wheat.

"The appreciation of the dollar pushes down the prices of commodities, which pushes down the price for Australian consumers," Professor Quiggin said.

Choice spokeswoman Ingrid Just said there was a "misconception" that food bills were still rising.

"Consumers may be quite surprised to see these results given that the overall cost of living feels like it has really increased," Ms Just said.

A recent national poll by Lonergan found more than three-quarters of respondents believed costs were rising faster than the official overall inflation rate of 2 per cent. Among these people, two-thirds of men and four out of five women mistakenly believed food prices had risen more than 2 per cent over the past year.

The costs that are actually rising fast are rents, rates, electricity, gas, healthcare and education expenses, Australian Bureau of Statistics data shows.

At the supermarket, shoppers have been saving $100 million a month on food, new research by Deloitte Access Economics claims.

The Deloitte report, commissioned by Coles, said that across the entire supermarket sector the "overall saving in food could in fact be worth $1.8 billion or more over the 18-month period" to end of June 2012.

Deloitte cited causes including increased competition between Coles and Woolworths as well as the entry of players such as Costco and before them, Aldi.

There may be more savings to come. Woolworths' general manager of fresh food Pat McEntee said that following excellent seasons in "almost all regions", shoppers would soon benefit from additional price reductions.

"We will start to see some further deflation in fruit and vegetables, which is great for the customer," Mr McEntee said. Currently Woolworths' average measure of fruit and vegetable prices is one per cent lower than this time last year.