Supermarkets should be forced to display signs letting customers know when products get smaller in size but prices stay the same or increase, Australian consumer groups argue.

As part of a crackdown on the practice, known as shrinkflation, the Australian Federal Government will implement a stronger unit pricing code, which will allow customers to compare the cost of goods by weight or volume.

Supermarkets that breach the enhanced code will be slapped with large penalties.

While consumer group Choice has welcomed the shrinkflation action, deputy campaign director Andy Kelly said supermarkets could go further to address the issue.

“To make shrinkflation more transparent, we really need labels on shelves alerting customers to when a product has shrunk, but the price has remained the same or increased,” he said.

“Choice has been calling for changes to the grocery unit pricing code for years to make unit pricing easier for consumers to use, including making it more visible and ensuring it’s used consistently.”

An investigation by the consumer advocacy group in March found 10 products affected by shrinkflation.

These included store-brand cereals at Coles and Woolworths that had been cut down in weight to 490 g, from 560g, but still cost the same.

Prime Minister Anthony Albanese said the crackdown would ensure consumers were getting the cheapest deals at the checkout.

“New product packaging shouldn’t mean that customers are paying more for less, so paying more for air just isn’t fair,” he told Brisbane radio station B105 on Thursday.

“When people are going around their supermarkets during cost of living pressures, they’re looking for value, they’re looking for specials.”

The Labor Government will consult on the code, on areas including improving readability and visibility of unit pricing in stores and addressing inconsistent use of units of measure across supermarkets.

A spokesman for Coles has said the company was committed to keeping prices low at its stores.

A Woolworths spokesperson has previously said packet and serving sizes were up to the individual manufacturer.

Coles and Woolworths make up almost 70% of supermarket retail sales nationwide.

The measures come after the consumer watchdog was given A$30 million ($33m) to investigate supermarket malpractice.

Treasurer Jim Chalmers also indicated he would work alongside the states and territories on changes to development laws to stop the practice of land banking - the purchase and holding of sites to shut out potential competitors - by the big supermarket operators.

Recent submissions to an Australian Competition and Consumer Commission inquiry highlighted concerns about the practice and the possibility it prevented other chains from increasing market share.

Opposition leader Peter Dutton said land banking was egregious.

“Ultimately, we want more competition in the market. We want greater consumer choice,” he told reporters in Melbourne.

“If consumers are being starved from that choice and prices are being held higher unnaturally, then that’s not in the interests of consumers or the economy.”

The commission announced on September 23 it was taking legal action against Coles and Woolworths for allegedly misleading customers through discount pricing claims.

A mandatory food and grocery code has been released by the Government for consultation, proposing multimillion-dollar penalties for retailers over serious breaches.

The previous code, which governed the relationship between supermarkets and suppliers, was voluntary.

- AAP