Grocery prices have increased for the first time since panic buying took hold of Australian grocery stores in the first half of 2020, analysts say.

Morningstar uses the Little Shopper Basket research tool which found prices at Coles and Woolworths were up 4% in the first quarter of the year

In February 2022, Woolworths and Coles management reported that their shelf prices had increased 2% and 3% and over 3% in the March 2022 quarter.

According to Morningstar’s research, the two rival chains were literally neck and neck, with Woolworths “marginally more expensive”.

 Morningstar expects food price inflation to average 2.5% over the next decade with intense competition with discount supermarket, Aldi, limiting inflationary pressures.

Coles CEO Steven Cain was quoted as saying categories such as meat and some packaged groceries were experiencing inflationary pressures that were beginning to filter through the aisles.

Morningstar said that shopping behaviour had changed due to higher prices.

While consumer staples were less susceptible to inflationary pressures than discretionary items, the product mix consumers buy may change. Instead of choosing the branded product, consumers might choose the private label, which could affect supermarket profit margins and consumers might move away from Coles and Woolworths in favour of Aldi.

Here are 10 ways to save-guard your finances:

1. Buy home brands

In Britain, where huge increases in food and other prices on supermarket shelves have led to inflation of well over 5 per cent, many shoppers are switching to home brands and away from branded goods. This means that those supermarkets offering good value local brands will win out.   ALDI is a big winner here.

2. Shrinkflation

Always read the cost by weight or single unit rather than the cost of the packet to beat “shrinkflation”, basically a sneaky way to deliver less and charge the same. The minor changes in the product sizes mean customers are less likely to notice the reduction, with packaging largely still looking the same, leading to customers paying more for what they get.

3. Check your power supplier and switch

Global coal and gas prices and fears over the reliability of Australia’s coal power generation are fueling an electricity crisis with electricity prices also set to rise.

4. Rethink your savings

Bad news: any savings you currently have are essentially losing value right now. The offensively low interest rates on offer aren’t keeping up with the rising costs of living, so you want to minimise the amount you’re keeping in cash right now. Your emergency fund should be in an easy-access account with the best rate you can find.

Right now, we like Westpac Life’s 2 per cent for 18- to 29-year-olds, but if you’re older, AMP and ING both offer 1.35 per cent. Keep in mind that they are all maximum rates, and they come with strings. For cash you won’t need for six months or longer, you might want to look at a term deposit – though they’re not that much better.

Macquarie Bank is currently offering 1.85 per cent on a 12-month deposit, which might be a good option while you save for a house, for example.

5. Get to investing

If you’re harbouring cash that you won’t need for a longer timeframe (at least five to ten years), now may be the time to get started investing in the stock market. You can start with as little as $500 and this is one of the best ways to beat inflation – though it also comes with the risk of losing all your money.
One of the safest ways for you to dip your toe in the sharemarket is with a diversified, low- cost exchange traded fund (ETF). It’s boring and you won’t get rich quick, but it’s better than watching your money shrink.
There are other ways to invest money, of course – property, art, crypto, gold, vintage cars – but investing in shares can be done on almost any budget and with minimal cost or effort.

6. Trim the fat

It’s not fun, but you may need to cut down on your spending. Start by comparing and saving your utilities. We generally recommend checking your plans every year or so to be sure you’re getting the best deal and if you haven’t done that recently, now is a great time.
Compare your car, contents and health insurance, gas and electricity at Compare the Market and make sure you’re not paying more than you ought to. Phone plans are cheap as chips at the moment, so hunt around and get your cheapest option.
Go through card statements and make sure you know what every item is, and that there
aren’t any subscriptions you’re paying for but not using.

See if you can reduce spending in other essential areas too: see if you can get discounts on petrol, or use Frugl (Android, iOS) to compare prices for specific products at Coles and Woolworths.

7. Fix your mortgage

You don’t want the double whammy of inflation and an increased rate on your home loan sucking up your savings. Now’s the time to hedge your bets against rising interest rates and fix your home loan rate. You can check out our wrap of the best fixed rates on the market right now and see whether you could save by refinancing.

8. Ask for a pay rise

If you don’t get a pay rise this year, you’ll effectively be taking a 3.5 per cent pay cut for doing the same work. That probably won’t suffice as an argument for why your employer should pay you more, so you’ll need to compile reasons (with evidence) why you’re due a bump. Take some tips on how to pitch a raise to your boss.
Take a look at similar jobs in your area to see what your job might be worth and use that number in your negotiations. And if your request for a raise is denied – consider applying for these higher paying jobs.

9. Don’t delay big purchases

Counterintuitively, if you know you need (or want) to make some bigger purchases, you might want to do it now. The cost of things like cars, houses, home improvements, holidays and gold have all gone up dramatically in the last few years and it’s unlikely to slow down anytime soon. It may save you money in the long run to buy now.

10. Invest in yourself

Investing in your own talent and education is one of the best ways to maintain your purchasing power over time. Think of future you earning “new dollars” with skills paid for with “old dollars”. You can upskill for free with online resources or through local community groups, or go for a university level qualification as a way to enhance your employability.

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