On the first of October, Australia's Reserve Bank removed the right of merchants to add credit card surcharges to transactions, a reform designed to make costs more transparent and banking cheaper for ordinary people. Within days, a different story emerged: cafes across the country began raising coffee prices by amounts far exceeding the 1.5% fee that had been abolished. What the policy intended as a gift to consumers may have instead handed businesses a socially acceptable moment to pass along costs they had long been absorbing — a reminder that well-meaning reforms do not always travel in st
Australian businesses exploit card surcharge ban to justify larger price hikes
Maybe this is the catalyst that caused cafes to wake up
Mark
So the ban was supposed to help consumers by making prices transparent. But it sounds like businesses just used it as an excuse to raise prices anyway?
Mimi
Not quite. The ban did make prices transparent—that part worked. But yes, some businesses raised prices by much more than the 1.5% surcharge they were losing. The question is whether they were using the ban as cover for cost increases they needed to make anyway.
Luke
We should be careful here. The surcharge ban was announced well in advance. If businesses had legitimate cost pressures, they could have raised prices before October 1st. The fact that 17% of cafes raised prices right after the ban suggests timing that's at least suspicious.
Mimi
True, but the restaurant association makes a real point about interest rates and wages. Four rate hikes in 2026 hit variable-rate loans hard. That's not an excuse—it's a genuine cost.
Mark
But how much of the 10% coffee price increase is actually explained by those costs? Is that data available?
Luke
It's not. We have the price increases, we have the stated cost pressures, but we don't have a breakdown showing how much of the increase is attributable to what. The ACCC is warning against misleading claims, which suggests they're concerned businesses are overstating the surcharge connection.
Mimi
The consumer advocate group Choice said it's too early to assess the full impact. They're waiting to see if prices stabilize or if this becomes the new normal.
Mark
So what's the actual harm here if consumers know the price up front?
Luke
The harm is if the surcharge ban becomes cover for price increases that exceed the actual cost pressures. Consumers can vote with their wallets, but only if they have good information about whether the increase is justified.
Mimi
And that's where the ACCC comes in. They're policing the messaging. Businesses can't claim the surcharge ban caused a 10% increase when their actual surcharge loss was 1.5%.
Mark
Has anyone actually been caught doing that?
Luke
Not yet, as far as the reporting shows. The ACCC has warned, but enforcement is another question.
Il Polso
- A Reserve Bank ban meant to protect consumers from hidden fees took effect October 1, but within days it was being used as political cover for price hikes many times larger than the surcharge itself.
- Seventeen percent of surveyed cafes raised coffee prices by an average of 50 cents — a 10% jump — despite the abolished surcharge having been only 1.5%, exposing a gap between policy intent and market reality.
- Economists identified 'round-up' pricing as the mechanism: businesses in an inflationary environment with resilient demand felt emboldened to bundle accumulated cost pressures into a single, policy-justified leap.
- The ACCC moved quickly to warn businesses against misleading consumers by attributing broader price rises to the surcharge ban, while the government scrambled to cover the ATO's own surcharge costs through mid-2027.
- Consumer advocates say the full picture is still forming, and that the most powerful check on opportunistic pricing may simply be customers choosing to walk away.
On the first of October, Australia's Reserve Bank removed the right of merchants to add credit card surcharges to transactions, a reform designed to make costs more transparent and banking cheaper for ordinary people. Within days, a different story emerged: cafes across the country began raising coffee prices by amounts far exceeding the 1.5% fee that had been abolished. What the policy intended as a gift to consumers may have instead handed businesses a socially acceptable moment to pass along costs they had long been absorbing — a reminder that well-meaning reforms do not always travel in straight lines between intention and outcome.
On October 1st, Australia's Reserve Bank banned credit card surcharges — those small percentage fees merchants had long added to transactions. The typical surcharge sat around 1.5%. The reform was designed to bring transparency to consumer costs and, over time, drive down the price of banking. What followed complicated that ambition considerably.
A survey of more than 1,500 cafes by price-tracking service Small Flat White found that 17% had raised coffee prices since the ban began. Among those who did, the average increase was 50 cents — more than 10% — a figure many multiples of the surcharge that no longer existed. Economists at UBS identified the pattern quickly, describing the ban as providing 'cover' for merchants to pass through much broader cost pressures in an environment where inflation persisted and consumer demand remained strong. The phenomenon of 'round-up' pricing — a $4.50 coffee becoming $5.00 overnight — suggested the policy change was being used as justification for increases driven by entirely separate forces.
The restaurant and cafe industry did not deny that costs were climbing. Its peak body pointed to rising produce prices, steep rents, recent changes to junior pay rates, and four interest rate rises in 2026 that had pushed up loan repayments. Its chief executive suggested the surcharge ban may have simply given business owners the catalyst they needed to finally act on accumulated pressures — and noted that Australian coffee prices remained among the cheapest in the world.
Regulators moved swiftly. The ACCC warned that businesses could not mislead consumers by attributing price rises solely to the surcharge ban when other costs were the real driver, and flagged that relabelling a surcharge under a different name could constitute misleading conduct. The ban had already generated enough friction that Treasurer Jim Chalmers was drawn in after the Tax Office announced it would stop accepting credit card payments — the government committed to covering those surcharge costs until mid-2027.
Consumer group Choice took a measured position. Its head of policy noted there was never any surprise that some businesses would respond to the ban with price increases, and that knowing the full price upfront still represented a gain for consumers. He acknowledged it was too early to assess the ban's full impact, and suggested that if businesses were raising prices well beyond the old surcharge, the most direct response remained with customers — to pay, or to go elsewhere.
On October 1st, Australia's Reserve Bank implemented a ban on credit card surcharges—those small percentage fees that merchants had been adding to transactions for years. The typical surcharge was about 1.5% of the purchase price. The policy was meant to increase transparency and eventually lower the cost of banking for consumers. What happened instead suggests the reform may have given businesses cover for something much larger.
Within days of the ban taking effect, cafes across the country began raising prices. Small Flat White, which tracks coffee prices online, surveyed more than 1,500 cafes and found that 17% of them had increased their prices since the surcharge ban began. Among those who raised prices, the average increase was 50 cents per coffee—a jump of more than 10%. That is many times over the 1.5% surcharge that no longer existed.
Economists noticed the pattern immediately. Stephen Wu, an economist at investment bank UBS, observed that the surcharge ban appeared to be functioning as "cover" for merchants to pass along much larger cost pressures to customers. In an environment of persistent inflation and strong consumer demand, he suggested, businesses felt emboldened to raise prices beyond what the surcharge ban alone would justify. The evidence of "round-up" pricing—where a coffee that might have cost $4.50 suddenly costs $5—suggested that merchants were using the policy change as political cover for increases driven by other factors entirely.
Wes Lambert, chief executive of the Australian Restaurant & Cafe Association, acknowledged that business costs were genuinely climbing. Restaurants and cafes faced rising produce costs, steep rents, and recent adjustments to junior pay rates and awards. Four interest rate hikes in 2026 had also driven up repayments on variable-rate loans and equipment financing. Lambert suggested that the surcharge ban may have simply given business owners the catalyst they needed to finally pass these accumulated costs to customers. "Maybe this is the catalyst that has caused cafes and restaurateurs around the country to wake up," he said. He also noted that coffee prices in Australia remained among the cheapest in the world, a point some business owners were using to justify the increases.
The regulatory response was swift. The Australian Competition and Consumer Commission warned businesses that they could not mislead consumers by claiming a price rise was due to the surcharge ban when the increase reflected other costs. The ACCC also flagged that businesses attempting to circumvent the ban by relabeling the surcharge as another type of fee "may be engaging in misleading conduct." The ban itself had triggered enough backlash from small business groups that Treasurer Jim Chalmers was forced to intervene when the Australian Taxation Office announced it would stop accepting credit card payments for tax owing. The government committed to funding the ATO to cover surcharge costs until mid-2027.
Morgan Campbell, head of policy at consumer advocate group Choice, took a measured view. He said there was never any surprise that some businesses would raise prices following the ban. "Consumers are better off knowing the price up front," he said, noting that the Reserve Bank had expected businesses to respond by seeking lower-cost bank providers. Campbell acknowledged it was too early for Choice to conduct its own research on how the surcharge ban was working in practice. He suggested that if some businesses were raising prices by far more than the surcharge itself, it was ultimately up to customers to decide how to respond—to pay the new price or take their business elsewhere.
Citazioni salienti
Consumers may be more accepting of price rises after years of above-target inflation, allowing merchants to use the surcharge ban as cover to pass through broader cost pressures— Stephen Wu, economist at UBS
Consumers are better off knowing the price up front, and it's too early to assess the full impact of the ban— Morgan Campbell, head of policy at Choice
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