Inflation Australia 2025: Milk, bread prices softer than headline rate

Consumers often blame food prices for cost of living pressures. But are insurance, electricity and school fees outpacing groceries?

Australians are making savings on a range of groceries including milk, bread and meat as new inflation data shows intangible services are the main cause of hip pocket pain.

The latest figures released by the Australian Bureau of Statistics on Wednesday show headline inflation rose 0.2 per cent in the December quarter, while annual inflation slowed to 3.2 per cent in the year to December.

The result was less than the 3.3 per cent forecasted by financial markets and below the 3.4 per cent expected by the Reserve Bank.

Dairy was the one of the few grocery categories that deflated in the year to December, dropping 0.9 per cent while the bread and cereal category rose only 2.2 per cent over the same period — below the headline inflation number.

United Dairyfarmers of Victoria president Bernie Free said agricultural leaders needed to convey the message that Australians paid some of the lowest prices for fresh food in the industrialised world.

“Whether its milk, or fruit and veg or meat, we’re very lucky in Australia to have such low prices compared to the rest of the world. We all want cheap food but you’ve got to have a fair price paid back to the primary producer,” Mr Free said.

“Dairy products have come down in price and those figures show that to be the case. We’ve got to have more fairness and transparency in the supply chain, because dairy and other farmers aren’t getting their fair share of the profits when there are eventual price rises.”

Western Australian grains farmer Rhys Turton next to his barley seed silos near York, 100km east of Perth. Photo: Richard Wainwright

Education costs led the inflationary pack with a 6.5 per cent spike between December 2023 and December 2024, while electricity was the most deflationary category — dropping 17.9 per cent over the same period.

Insurance and financial service costs also outpaced the headline inflation figure at 5.2 per cent over the 12 months to December.

GrainGrowers chairman Rhys Turton said input costs from insurance, electricity, fertiliser and fuel had been a bugbear for primary producers nationwide for the past three years.

The West Australian farmer said the soft rise in bread and grain grocery category was only in small part attributed to wheat prices.

“I’d say wheat prices only account for 10 per cent of the eventual price of bread at the supermarket or bakery,” Mr Turton said.

“There are a lot of other costs involved — the manufacturing process, transportation, labour at various points along the supply chain. But it doesn’t surprise me that bread hasn’t risen in cost in the same way other products have.”

ABS head of prices statistics Michelle Marquardt said with the release of this week’s results, non-discretionary inflation was lower than discretionary inflation for the first time in nearly four years.

She said the non-discretionary category includes goods and services that are harder for households to reduce consumption, such as food, automotive fuel, housing and health costs.