Price Stickiness in Australia: What It Means for Consumers in 2025

Ever wondered why your favourite café’s flat white stayed $5—even when milk prices dropped? Or why supermarket staples barely budged during supply chain recoveries? The phenomenon is known as price stickiness, and in 2025, it’s a crucial piece of Australia’s economic puzzle.

What is Price Stickiness and Why Does It Matter?

Price stickiness refers to the tendency of prices to remain stable, even when underlying costs or market conditions change. In Australia, this has real-world impacts—affecting everything from grocery bills to mortgage rates. While economists have debated price stickiness for decades, it’s especially relevant now as Australia navigates the aftershocks of pandemic-era inflation, supply disruptions, and a shifting policy environment.

• Menu costs: Businesses incur costs when changing prices (printing new menus, updating systems), making them reluctant to adjust frequently.

• Customer expectations: Sudden price drops can signal poor quality or financial distress, so firms often maintain stable prices for reputational reasons.

• Contracts and regulations: Many Australian service providers (utilities, childcare, rents) operate under contracts that restrict price changes to fixed intervals.

The 2025 Australian Context: Policy and Market Forces Collide

Australia’s Reserve Bank (RBA) ended its rapid rate-hiking cycle in late 2024, citing moderating inflation and easing supply chain bottlenecks. Yet, many consumer prices remain stubbornly high. For example, while global shipping costs have eased and wholesale produce prices have fallen, supermarket prices have barely nudged down. The 2025 Federal Budget included incentives for competition in essential services, but the impact has been muted so far.

Key examples of price stickiness in 2025:

• Supermarkets: Despite increased competition (e.g., Aldi’s expansion and new independents), grocery prices remain elevated compared to pre-pandemic levels. Woolworths and Coles cite higher wage costs and new supply contracts as reasons for holding prices steady.

• Rents: While the pace of rent increases has slowed, few landlords have reduced rents—even in oversupplied city centres. Fixed-term leases and high demand contribute to this stickiness.

• Energy: Wholesale electricity prices dropped 15% year-on-year after new renewables came online, but household bills saw only minor reductions. Retailers point to legacy contracts and regulatory lag.

How Price Stickiness Impacts Australian Households

For consumers, price stickiness means that relief from lower supply costs or policy changes is slow to arrive at the checkout. It can also mask underlying economic risks—such as when businesses avoid passing on cost cuts to rebuild margins lost during tough years. This can erode household purchasing power and dampen the effectiveness of RBA policy moves.

Some strategies for navigating a sticky price environment:

• Negotiate contracts: For services like insurance or broadband, push for price reviews at renewal time.

• Shop around: Use price comparison tools to find better deals, especially in groceries and utilities.

• Watch for lagged reductions: Some industries, like petrol or airfares, eventually pass on cost changes—so keep an eye out for delayed price drops.

Can Price Stickiness Loosen Up in 2025?

While price stickiness is persistent, it’s not permanent. Increased digital competition, government scrutiny (like the ACCC’s 2025 supermarket inquiry), and consumer activism are all putting pressure on firms to justify prices. But the process is slow, and Australian households should expect a cautious, uneven return to more flexible pricing—especially in essential goods and services.