The consumer watchdog will carry out an inquiry on supermarket prices, examining whether consumers are paying too much at the checkout.

In a speech to the National Press Club, Prime Minister Anthony Albanese announced Treasurer Jim Chalmers would direct the Australian Competition and Consumer Commission to conduct a year-long probe into the supermarket industry.

The inquiry is expected to focus on the differences between prices paid for fresh produce by major supermarkets from farmers and what customers pay in store.

It comes as the supermarket duopoly Coles and Woolworths have been accused of price gouging on fruit, vegetables and meat.

“When farmers are selling their product for less, supermarkets should charge Australians less,” Mr Albanese said.

“The ACCC has significant powers, and it is the best and most effective body to investigate supermarket prices.”

The inquiry will also look at how online shopping and loyalty programs as well as technology are affecting competition in the industry.

The prime minister said the government would also give further funding to consumer group Choice to provide information to shoppers on supermarket prices.

“Across thousands of products, it can be hard for people to find the best deal. We are backing Choice, renowned for their commitment to consumer fairness, to provide regular information on prices across a basket of goods,” Mr Albanese said.

“This will promote transparency, enhance competition and drive value.”

The consumer watchdog inquiry follows a review into the food and grocery code of conduct, being overseen by former Labor minister Craig Emerson.

The code of conduct regulates the conduct between supermarkets and suppliers and is voluntary, but the review will look at whether it should be mandatory.

A separate Senate inquiry is also expected to begin hearings in February on prices at the supermarket checkout.

By Andrew Brown in Canberra