Grocery prices temper as supermarket scrutiny grows

Grocery prices have fallen as scrutiny piles onto the supermarket giants, but this relief could be temporary as Labor rejects calls to back divestiture laws.

A parliamentary inquiry into supermarket prices handed down its final report on Tuesday, backing laws to break up big players in the grocery sector.

Among 14 recommendations from the Greens-led inquiry were calls for supermarket specific divestiture laws, which would be used if grocery chains were found to have misused their market power or "engaged in unconscionable conduct".

Inquiry chair Nick McKim said supermarket prices had already dipped.

"We have seen prices coming down a little bit recently and that's in large part because of the scrutiny on the behaviour of the supermarket corporations," he told Sunrise on Wednesday.

"But what we need is not just temporary falls in prices, we need to see food and grocery prices come down on a long-term basis in Australia.

"Taking together the recommendations we have made, we think they'll achieve that."

A spokesperson from Woolworths Group said the supermarket giant would review the report and work with other inquiries already under way.

"In the meantime, grocery inflation is coming down in our supermarkets and we continue to work hard to help customers find the best possible value, while also taking care of our team and doing the right thing with our suppliers," they said.

Meanwhile, the federal government has distanced itself proposals for divestiture, with Labor senators not supporting the recommendation.

Government senators Glenn Sterle and Louise Pratt, who served on the committee, said plans to break up major supermarkets would not deliver reform that would benefit customers at the checkout.

"Divestiture powers could lead to unintended consequences that have the potential to make Australian consumers and farmers worse off," they said.

"We are particularly concerned about the impact that disruption to thin supply chains may have on regional communities."

In a dissenting report, the coalition said divestiture laws were not needed, but powers should be targeted to sectors of concern, with safeguards for regional jobs and services.

"What we want to see is sensible changes to allow for protection of consumers and small businesses," opposition finance woman Jane Hume said.

"Divestiture powers need to be used carefully."

In addition to the proposal targeting supermarkets Senator McKim said similar powers should be extended to other industries with high market concentration like banking, airline, energy and telecommunications sectors.

The inquiry also recommended laws that would ban price gouging and give greater powers to the consumer watchdog to investigate unfair trading practices.

It also called for the Food and Grocery code of conduct, which governs the relationship between supermarkets and suppliers, to be made mandatory.