The plan, which would raise costs for manufacturers, comes just two months after Food Standards Australia New Zealand (FSANZ) called for mandatory fortification of baked goods with the B vitamin folic acid.
Cheryl Downie, executive officer of the Baking Industry Association of Victoria, said bakers were "tired of the way food has become a vehicle for medicine" .
"And they're not even convinced that these moves are meeting the targets they're aimed at," she told AP-Foodtechnology.com.
FSANZ was asked to develop a food standard for iodine fortification to tackle the re-emergence of moderate deficiency in the mineral in New Zealand and some parts of Australia.
Iodine is naturally found in seafood but levels in vegetables, dairy and meat can depend on the natural iodine content of the soil in which the vegetables were grown or where the animal grazed.
Some table salt is already iodised but people are using less salt in cooking and at the table because of advice to cut down on the ingredient for health reasons.
Iodine intake has also been indirectly affected by changes in dairy processing.
Milk used to contain higher levels of iodine because of contamination from iodine-based disinfectants but these have gradually been replaced by more effective non-iodine products.
FSANZ is calling for manufacturers of breakfast cereals, breads and biscuits to replace any salt already used in these products with iodised salt.
"It is important that we take action to fortify food now as mild-to-moderate iodine deficiency could become worse in the overall population if no action is taken," said FSANZ chief scientist Dr Marion Healy.
Mild-to-moderate iodine deficiency can reduce cognitive ability, hearing and motor skills and is especially risky for young infants and the developing foetus.
However pregnant women will still be required to take iodine supplements after fortification as the levels consumed are unlikely to be sufficient to protect babies' brains.
FSANZ said that the levels of fortification will significantly improve the iodine status of the whole population while also ensuring the safety of foods.
And replacing existing salt with iodised salt will not increase overall salt consumption or change the appearance or taste of cereal, bread or biscuits.
But processors will spend about 10 per cent more on iodised salt than the non-iodised variant, and will also face extra sourcing and re-labelling costs.
FSANZ estimates that Australian firms will spend up to $2000 per SKU while in New Zealand it will cost up to NZ$1000.
There could also be trade-related costs for companies supplying different markets as some countries prohibit iodine-fortified foods.
The bakery sector has already voiced its opposition to a proposal last month for mandatory fortification of baked goods with folic acid.
Companies like George Weston Foods said the proposal was based on out-of-date information about national diets - the last national diet survey in Australia was carried out in 1995, and women now eat less bread.
They argue that fortifying bread is therefore not the best vehicle for improving folic acid intake in this specific population group.
Comments on the iodine proposal must be submitted by 6pm on Friday 15 September.