The most recent Australian Bureau of Statistics Consumer Price Index data shows the food price index rose 1.8% in the December 2005 quarter compared to the previous quarter, easily outstripping the general inflation rate of just 0.5%.
The biggest hikes were in fruit and vegetable prices which rose 5.8% and 6.8% respectively.
Bread rose 3.6%, milk 2.3% and cheese 2.1% while beef and veal jumped 1.9%.
The cost of pork, lamb and mutton and poultry fell during the quarter by 3.1%, 2.5% and 0.6% respectively.
According to food and agribusiness banking specialist Rabobank , food prices rose as manufacturers looked to pass on rising fuel, plastic and raw material costs, and adverse weather created supply shortages in some product lines.
Rabobank senior dairy analyst Tim Hunt said manufacturers had pushed through price increases to offset rising costs of transport and plastics.
Bread prices increased by 6.2% for 2005.
Beef retail prices increased by 7.4% for the year, capping off a year of strong retail price growth for beef.