Westpac’s latest inflation estimate—just 1.9% for April—has landed like a feather in a firestorm. While the figure might soothe bond traders and rate-cut watchers, it’s sparked confusion among ordinary Australians trying to reconcile that number with the relentless climb of their grocery bills.
The bank’s update—amplified by financial commentator Pete Wargent—suggests price pressures are retreating. Markets have responded accordingly: the cash rate is now tipped to fall to 3.2% by early 2026. The Reserve Bank’s own May outlook supports this thesis, citing global trends as disinflationary, with softening trade and weaker commodity demand nudging inflation back within target range. The RBA, in lockstep with Westpac, has already cut rates by 25 basis points.
But ask shoppers at Coles or Woolies whether things feel cheaper and you’re likely to get an eye-roll. A 2L bottle of Pepsi Max now costs $3.80, up from $2.00—an eye-watering 90% leap. Orange juice has surged 18.5% year-on-year, and those figures are not outliers. Anecdotal price hikes across staples—from eggs to frozen veggies—are flooding Reddit threads, with frustrated shoppers asking: are we in the same economy as the one economists are measuring?
The tension between official figures and supermarket receipts is both economic and psychological. The Consumer Price Index (CPI) is a broad average. It includes housing, transport, healthcare, recreation—some of which have flatlined or even fallen. Housing costs, for instance, are easing slightly due to falling mortgage rates. Financial journalist Alan Kohler recently pointed out that improved affordability in some sectors is offsetting price spikes elsewhere.
But food, unlike many other goods, is bought weekly or daily. Its price movements are felt more sharply. And food pricing is notoriously volatile, driven by seasonal weather, global supply chains, shipping delays, fuel costs, and agricultural yields. A disrupted citrus harvest can send orange juice costs soaring. A hike in global aluminium or logistics expenses can push up the price of soft drink bottles. The CPI captures these changes—but only as part of a larger equation.
It’s also about power. Coles and Woolworths, with a combined market share north of 65%, have few real challengers. Their pricing decisions ripple across the entire economy. In 2024, Woolworths reported $1.6 billion in profits—up over 4%—while Coles notched up $1.1 billion. Critics have accused both chains of price gouging. And while they dispute this—citing higher farmgate costs and commitments to suppliers—the concentration of retail power makes any cost increase more sticky.
Then there’s shrinkflation. Fewer chips in the packet. Less toilet paper per roll. Prices don’t rise, but value falls. Consumers often perceive this as a price hike, and they’re not wrong. It’s a stealthy margin booster for retailers and a source of resentment for buyers.
So what’s the takeaway? While Westpac’s 1.9% might be statistically sound, it doesn’t capture consumer pain points. A family that shops weekly feels the orange juice jump far more than a quarterly dip in airfares or a stabilisation in petrol prices. The perception gap widens when the most frequent transactions—groceries—seem out of sync with economic optimism.
That doesn’t mean the bank is wrong. It means inflation, by design, is a blunt instrument. It balances the fall in used car prices with the rise in cucumbers. It tracks averages, not irritations. But averages don’t pay the till.
Other institutions aren’t quite as dovish. Commonwealth Bank, in its May update, projected CPI at 2.5% by mid-2025. ANZ landed closer to Westpac, forecasting 2.1%. The Treasury, back in February, suggested inflation would settle at 2.75% for 2025–26. So the consensus leans toward moderation, but no one’s calling it a collapse.
And moderation could be a double-edged sword. If inflation falls too far, it may reflect deeper malaise: weak demand, stagnant wages, or faltering growth. For borrowers, lower rates offer some relief—but they won’t help much if job losses rise or household incomes stall. For now, Australia isn’t there. Employment remains strong. But food price pain, driven by supply pressures and retailer tactics, persists.
Independent economists remain sceptical. Chris Richardson, in a May interview with the ABC, warned against declaring victory. Pockets of pain, he argued—particularly in essentials like food and services—could endure even as headline inflation drops. Saul Eslake, speaking to The Guardian, highlighted the lack of genuine supermarket competition as a structural problem. Until new players disrupt that duopoly, consumers will likely keep feeling the squeeze.
What can shoppers do? Some are keeping price diaries. Others are switching to generics or using discount apps to chase deals. Home brands, often 20–40% cheaper, are getting more shelf space in consumer trolleys. None of this changes inflation metrics—but it’s how Australians are recalibrating their budgets in real time.
Whether the 1.9% becomes a new normal or a fleeting low point depends on global forces as much as domestic settings. But one thing is certain: Australians don’t live in the CPI spreadsheet. They live in a supermarket aisle, wondering why their trolley costs $30 more than last month.
And until that gap closes—between forecast and felt reality—the scepticism will linger.
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