Coffee prices at some cafes rise 10pc after RBA imposes card surcharge ban

A ban on card surcharges has resulted in some cafe owners lifting the price of their coffee.

About 17 per cent of cafes are now charging more for a flat white, compared to prices prior to October 1, when the Reserve Bank's ban took effect.

That is according to Small Flat White, an online platform that tracks coffee prices across more than 1,500 cafes.

Typically, the increase was 50 cents, or almost 10 per cent of the coffee's price, much higher than the typical 0.5 to 1.5 per cent surcharge consumers used to pay on their credit or debit card transactions.

Not every hospitality business has raised its prices in the immediate aftermath of the ban.

Avtar Singh, owner of a Thai restaurant in Hobart, said he was currently absorbing the cost of the surcharges but eventually would have to raise prices.

"The government needs to understand small businesses are already at a very thin margin," he told the ABC.

"If you squeeze it any further, it'll come to a point where doing business is very, very difficult."

RBA kicks 'own goal'

Most cafes or restaurants have raised prices in some way, either by raising menu prices or increasing weekend or public holiday surcharges, said Wes Lambert, chief executive of the Australian Restaurant and Cafe Association.

"Increasing prices can always affect demand, so that certainly is an unintended consequence that the RBA could not have predicted, because they believed that prices would only go up 0.1 per cent," he said.

Mr Lambert said some businesses had started taking cash-only payments or accepting bank transfers.

"They should have known better that inflation was going to remain pesky and that this ban would come online during a cost of living crisis and potentially should have delayed the ban during this high inflationary and high interest environment."

The RBA has said the previous system was no longer working as intended, with surcharges increasingly difficult for consumers to avoid.

The central bank has also said only about 16 per cent of businesses were surcharging and the ban was designed to reduce card acceptance costs, particularly for small businesses.

Reforms unlikely to affect interest rates

If the surcharge ban results in higher inflation, that effect would likely be temporary and have no effect on interest rates, according to Westpac chief economist Luci Ellis.

"Previously surcharges were imposed to reflect the cost of accepting certain types of payment, that's now been bundled into the price, so some business have increased their prices, but that's a one-off, not inherently inflationary," she said.

"Most of the reports we've seen of prices increasing … more than what the surcharge had been were in hospitality.

"There are plenty of other inflationary forces going round, including the pass-through of high energy costs onto other prices that the Reserve Bank's going to be much more focused on."

AMP chief economist Shane Oliver agreed.

"The overall macroeconomic impact from higher prices flowing from the ban on surcharges may not be that significant," he said.

Mr Oliver said many large businesses were already not charging surcharges.

"It's really just an issue for small businesses, but there still may be some upwards boost to inflation, albeit minor," he said.

"In theory, the RBA may just look through it as it's a one-off impact, but it may be hard to disentangle a general rise in prices from the impact of the surcharge versus other factors."

The Reserve Bank declined to comment.