After years of intense competition between supermarkets and heavy discounting, the drought has forced the hand of suppliers and driven up the cost of food.

Combined with export demand and higher fuel costs, food prices have been heading north at a faster rate than inflation.

The latest data from the Australian Bureau of Statistics shows Consumer Price Inflation (CPI) at 1.7 per cent from the year to the September quarter compared to 2.3 per cent for food and non-alcoholic beverages.

Combined with export demand and higher fuel costs, food prices have been heading north at a faster rate than inflation. (9News)

Australians are paying 14 per cent more for lamb than a year ago, seven per cent more for beef, 5.2 per cent for poultry, 3.6 per cent for breads and cereals and six per cent for dairy. Lamb has become so expensive that 9News understands Aldi isn't stocking some cuts at all at the moment.

ABS chief economist Bruce Hockman said there has been upward pressure on beef prices not only due to drought but also a 65 per cent increase in demand for our beef from China.

"If it's just looking at groceries, they're certainly paying more for their groceries but they're paying less in some other areas, so electricity costs are down for example - housing costs are down for the year," he said.

He expects fuel prices to be higher in the as yet unpublished December quarter which has the potential to drive food prices even higher.

After years of intense competition between supermarkets and heavy discounting, the drought has forced the hand of suppliers and driven up the cost of food. (9News)

Australians are paying 14 per cent more for lamb than a year ago, seven per cent more for beef, 5.2 per cent for poultry, 3.6 per cent for breads and cereals and six per cent for dairy. (9News)

Professor Gary Mortimer from the QUT Business School says while families have been happy to pay a levy on milk to help struggling dairy farmers, the price hikes are now spreading throughout the trolley.

"When we start to look at broad increases across dairy, meat, fresh produce, certainly cereals and bread, it's going to start impacting family household budgets," he said.