Shoppers could pay lower prices for higher quality produce as the government cracks down on anti-competitive behaviour at the major supermarkets.
The federal government on Monday announced it will accept all 11 recommendations of a recent review into the voluntary Food and Grocery Code of Conduct to protect suppliers and consumers after an outcry over checkout prices.
Any supermarkets with an annual Australian revenue above $5 billion will be now forced to abide by the code, which means they could be fined up to $10 million for breaches.
Farmers and suppliers, who have previously feared retribution from supermarkets, can raise concerns through a new anonymous complaints mechanism within the consumer watchdog.
Review leader Craig Emerson said he was encouraged the government had responded to his report quickly and decisively.
"It means that what was a voluntary and ineffective code is now going to be very effective," he told reporters in Canberra on Monday.
"The supermarkets will need to treat their suppliers respectfully and not use that superior bargaining power - the muscle that they have - over particularly the smaller suppliers.
"That's really good for the suppliers, but in the same way, it's really good for the shoppers at the supermarkets, because they get lower prices and higher quality."
Other recommendations include strengthening dispute resolutions and improving outcomes for suppliers of fresh produce.
Treasurer Jim Chalmers said it was important the supermarket chains "do the right thing".
"This is all about ensuring a fair go for farmers and families," he said.
The Nationals Farmers' Federation has welcomed the proposed changes but its acting executive Charlie Thomas said he was disappointed the code did not extend to other sectors like gardening and nursery supplies.
"These changes should finally give the code the clout it needs to protect farmers," he said.
Greens Senator Nick McKim said the government was not doing enough.
He said if Labor politicians wanted change they should vote on a Greens Senate bill that would introduce divestiture powers into competition law and allow the government to step in and break up food retail giants.
"The government's response ... will do absolutely nothing to bring down food and grocery prices," Senator McKim told reporters.
"This will be Anthony Albanese's moment to choose whether he's on the side of Australian shoppers, or whether he's on the side of the supermarket corporations, Coles and Woolworths."
Nationals leader David Littleproud said the coalition would soon introduce its own competition policy that could involve divestiture powers as well.
"If the supermarkets are doing the right thing by farmers and consumers, then they have nothing to fear and this power will never be used," he told reporters.
The code is an agreement which aims to improve business behaviour across the grocery sector, particularly relating to the relationships between retailers, wholesalers and suppliers.
Suppliers are automatically covered by the code but it was voluntary for supermarkets, though the major chains had signed up.
A spokesperson for Woolworths said they would support price transparency initiatives.
"We firmly believe healthy retailer and supplier relationships are key to the continued success of our sector, as well as serving the needs of millions of customers," the representative said.
"While there is broad support for greater price transparency in the sector, there isn't yet consensus on how to deliver it".
A Coles statement said the supermarket was committed to a healthy and sustainable grocery sector and would consider the government's response.
Aldi said it would participant in any further consultation process.
"We set high standards when it comes to collaborating with our supply partners, and we have a reputation of being a fair and respectful partner to them," a statement said.
The review is a major part of the federal government's broad competition reform agenda, which includes an Australian Competition and Consumer Commission inquiry into supermarket prices.
