Consumers will be able to monitor the cost of groceries online as part of an inquiry into the industry by the Australian consumer watchdog, the federal government says.

Assistant Treasurer Chris Bowen said the government had instructed the Australian Competition and Consumer Commission (ACCC) to develop a "basket of grocery goods" that will be used to monitor price changes over time and across the country.

"The ACCC will be developing a dedicated website which will be linked to the ACCC website, which will publish those prices on a regular basis," Mr Bowen said.

The product price monitoring is part of an inquiry into grocery prices that was first announced by Prime Minister Kevin Rudd in July 2007, before Labor won power.

Mr Bowen, who is also the minister for competition policy and consumer affairs, said grocery prices were exerting significant pressure on all Australians.

"Australian working families, and retirees in particular, feel the pressure at the checkout," he said.

"While inflation has been low over the last few years, food inflation has been higher than average and there is considerable evidence to suggest Australian food inflation has been higher than the world average," Mr Bowen said.

According to Mr Bowen, Australia has one of the most concentrated grocery industries in the world, which the inquiry will examine for any evidence of price gouging.

"One of the issues that the inquiry will be specifically looking at is competition issues," he said.

"It will be looking at the concentration of the Australian grocery market and what the government approach to that should be."

The probe will also examine the role of primary producers and wholesalers in the grocery chain.

"This inquiry will follow prices from the farm gate to the checkout," Mr Bowen said.

The federal opposition says the inquiry needs to deliver ways to reduce prices - or the Australian electorate will have been duped.

Opposition treasury spokesman Malcolm Turnbull said he would reserve his judgment on the inquiry until after it was completed.

He said Prime Minister Kevin Rudd had to deliver measures to reduce grocery prices after promising as much to the electorate before last year's election.

"Mr Rudd never failed to make a point about petrol price and grocery prices. He's come out and said he can't do anything about petrol prices," Mr Turnbull told reporters.

"We look forward after the inquiry to the positive measures that will bring grocery prices down.

"Because if he is as ineffectual with grocery prices as he has been with petrol then he would have spun himself into office with claims of no substance whatsoever."

The ACCC will soon begin accepting submissions from the public and will hold hearings across the country.

The watchdog is required to report to the minister by July 31.