Supermarkets will be forced to display the unit price of groceries to help consumers get the best value, but a six-month inquiry into competition in the industry has failed to uncover any easy solution to price rises.
Despite complaints from growers and farmers, the competition watchdog's report, released yesterday, found no specific cases of outright anti-competitive behaviour by the supermarket giants, Coles and Woolworths.
But a shake-up of state planning laws and a closer investigation of exclusive tenancy agreements between shopping mall landlords and Coles and Woolworths are planned, after the watchdog uncovered "high barriers to entry and expansion" in the industry.
From today, consumers will also have access to a new website, www.grocerychoice.gov.au, which will give price comparisons at stores around the country.
The Rudd Government has committed to establish a national system of "unit pricing" - such as per kilogram or per gram - under which the big retailers will be forced to display prices on an easily comparable basis across brands and different sizes. The Government will consult with industry on how best to design the scheme.
However, elected on a promise to keep grocery and petrol prices as low as possible, the report by the Australian Competition and Consumer Commission highlights the political difficulty the Government is experiencing in translating its campaign rhetoric into action.
The FuelWatch scheme has been criticised as an ineffective response to rising petrol prices. A succession of interest rate rises has added to pressure on household budgets.
Now, the 642-page commission report has fallen short of some expectations for a radical shake-up of the grocery industry.
"The ACCC has not identified anything that is fundamentally wrong with the grocery supply chain," the report said.
Nor could the big chains be blamed for the increase in food prices.
"The level of concentration in the Australian market, although not optimal, is not an uncompetitive level," it said.
More tangible relief for households will flow from an anticipated cut in the official interest rate by the Reserve Bank, which markets expect next month.
While food prices had risen more quickly than inflation for more than a decade, and faster than the average of comparable economies for more than two, this was not because of the market power of Coles and Woolworths.
Drought, natural disasters, quarantine restrictions, the increased cost of fertiliser and petrol, competition from biofuels and higher global demand for foods such as meat and dairy were the main drivers.
The Australian National Retailers Association, which represents Coles and Woolworths, welcomed the finding, saying it was a "myth-buster".
But the commission has identified several deficiencies in the market, including high barriers to entry for new competitors. It found supermarkets could stymie attempts by rivals to set up stores near their own.
The Government will refer this to the Council of Australian Governments.
A survey of 700 Woolworths and 700 Coles supermarkets found consumers paid about 1pc less if there was a competitor or ALDI store within a kilometre of the store.
"Even if consumers do not shop at ALDI, they benefit from lower prices from ALDI being in their neighbourhood," said the managing director of ALDI, Michael Kloeters.
But Coles and Woolworths were found to control a smaller slice of the market than the often-claimed 80pc.
The commission said the chains had 70pc of the packaged groceries market and 50pc of fresh food sales.
Independent grocers provided less competition than commonly thought because they usually bought stock at the same price from the same wholesaler, Metcash.
The managing director of Franklins, Aubrey Zelinsky, said the report failed "to recommend solutions to address the concentration of market power held by the three major participants in the industry".
The Opposition Leader, Brendan Nelson, said the report would do nothing to cut prices and had shifted the burden back to consumers to shop around.
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