Treasurer Jim Chalmers says the government wants to pursue a proposed multi-million-dollar penalty regime for the supermarket sector if grocers such as Coles and Woolworths engage in anti-competitive behaviour.

Former Labor minister and economist Craig Emerson has published an interim review of the grocers code of conduct, which has suggested fines of up to 10 per cent of annual revenue for supermarket corporations which mistreat suppliers.

Mr Chalmers said the government supported Dr Emerson's recommendations, subject to consultation with the industry.

"What we're talking about here is making the code compulsory, having big penalties for people who do the wrong thing, getting the dispute resolution right, so farmers and suppliers can't be dudded," Mr Chalmers said.

"We know that this is an interim report, we know that there's a few weeks of consultation to follow, but he's made it clear about those eight firm recommendations.

"We support those in-principle subject to consultation that will happen over the next few weeks. 

"A big motivation is to put downward pressure on prices … we want to make sure our businesses are more productive and competitive."

The government-initiated review did not, however, back a push for break-up powers that could force Coles and Woolworths to sell off parts of their businesses if a court ordered them to do so.

Prime Minister Anthony Albanese said Dr Emerson had delivered a "very strong interim report".

"Clearly we are signalling the direction in which Dr Emerson is headed," Mr Albanese said.

"This work is all about how we make our supermarkets as competitive as they can be, so that Australians get the best deal possible, whether they be the providers or, of course, the consumers at the check-out.

"And this recommends the code be made mandatory with very heavy penalties for major breaches."

Mr Albanese noted the current code "essentially is run by the same businesses that are being complained about".

In a statement, Woolworths said it supported the Food and Grocery Code of Conduct becoming mandatory for all major retailers, as well as for retailers which competed in grocery categories such as Bunnings and Chemist Warehouse.

"We support the recommendation to retain fast and cost effective avenues for dispute resolution, for the benefit of suppliers, especially smaller ones," the company added.

Coles said it was proud to be a founding signatory to the voluntary industry code, but did not weigh into the recommendations.

"We remain committed to the objectives of the code in delivering value to our customers while maintaining strong, collaborative relationships with our valued suppliers. We will continue to work constructively as part of this review process," a spokesperson said.

PM says break-up powers 'populist', not practical

The government has faced a push to introduce divestiture powers that would allow a court to punish the supermarket giants by forcing them to sell off parts of their businesses, such as their liquor arms, if they were found to have abused their market power.

In an uncommon move, the Nationals and Greens have joined forces within parliament to push for the powers, which have been derided by Mr Albanese as a "Soviet" measure.

Dr Emerson in his interim findings said break-up powers were not a credible way to improve competition in the supermarket sector — though the matter was outside the scope of the review.