Crackdown on ‘Shrinkflation’ Overlooks Root Cause Behind Inflation: Retail Body

The Australian Retail Association says a government crackdown on “shrinkflation” ignores the issues that have contributed to price increases.

A woman shops while holding her child in a supermarket in Albany, Western Australia, on April 11, 2024. Susan Mortimer/The Epoch Times

The Australian Retail Association (ARA) says new measures put forward by the federal government to curb “shrinkflation” are overlooking broader economic issues.

On Oct. 3, Prime Minister Anthony Albanese revealed he was planning to create tougher regulations for supermarkets to raise awareness about “shrinkflation” —the practice of decreasing a product’s weight or volume while maintaining or increasing its price.

The regulations would push for clearer and uniform “unit price” labelling on products.

Unit pricing breaks down the price per volume measure or weight. Many stores already offer unit pricing comparisons, but the government says the system is inconsistent.

Albanese said there would be penalties to make supermarkets follow unit pricing rules to ensure “a fair deal when you buy.”

ARA CEO Paul Zahra said the supermarket sector had cooperated and participated in seven taxpayer-funded inquiries into the sector in the past 12 months.

“There has been even further funding invested into price-focused initiatives such as the recent $1.1 million CHOICE supermarket research,” he told The Epoch Times.

“This approach [regarding unit pricing] feels like it is overlooking broader economic issues that have a far greater impact on the family budget, such as interest rates, given we know food and grocery shopping accounts for around 10 percent of a family’s weekly budget.”

Zahra said the government should tackle the root causes of supermarket price increases, because they were at the end of a chain reaction of economic challenges.

“We know other industry sectors such as insurance and fuel have seen much higher price hikes than supermarkets, which have a flow-on effect to retail,” he said.

According to Zahra, recent supermarket inquiries and reports found that food and non-alcoholic drink inflation was broadly aligned with overall inflation across the March 2019 and June 2024 quarters.

As of the June 2024 quarter, the increase in prices since the March 2019 quarter for an equivalent basket of goods is lower for Australia (an approximate 24 percent increase) than the Organisation for Economic Cooperation and Development average (39 percent increase) and the lowest among the sampled countries.

“Coles and Woolworths consistently make less than three or four cents profit in the dollar—that information is transparently available on the public record,” Zahra said.

Supermarkets Taking Action

A spokesperson for Woolworths told The Epoch Times that package sizes were a matter for individual manufacturers.

“Changes to pack sizes for branded products are decisions made by the supplier and are not common for Woolworths’ range of own brand products,” they said.

Woolworths said shoppers were “savvy” when it came to looking for cheaper pricing, and as such, the supermarket giant had introduced a number of key measures to help facilitate cheaper shopping.

“We know they compare the price of products and we’ve been focused on making it easier to find ones they love at the budget that suits them,” the spokesperson said.

“Around 117,000 customers a week are using our ‘best unit price’ filter on the Woolworths website and app.

“While the option has been in place for some time, we recognised the need to make it more user friendly. That’s why more than a year ago we redesigned the app and website to make it easier to compare unit prices across the 20,000 plus products we stock.”

The spokesperson said Woolworths was also rolling out electronic shelf labels in response to customer feedback and has made changes to make unit pricing more visible.