By Scott Murdoch and Christine Chen
SYDNEY, Oct 1 (Reuters) – Australian businesses said a ban on card surcharges that took effect on Thursday would force them to raise prices, casting doubt on government claims the change would lower living costs by eliminating more than $1 billion in annual card fees.
The country’s central bank abolished surcharges of 0.5% to 1.5% for paying with a credit or debit card rather than cash and lowered interchange fees paid by businesses following a review.
The centre-left Labor government said the policy would help provide cost-of-living relief to consumers in a country where the vast majority of payments are made by card. It said the change would save Australians A$1.6 billion ($1.11 billion) a year in fees, while businesses would also save about A$910 million.
Sydney bar owner Dre Walters said the surcharge changes were an additional cost for his business on top of alcohol taxes being increased by the government twice a year in line with inflation.
“100% this will be passed on. I don’t know how the government is saying it will result in cheaper prices. It will definitely be factored into prices,” said Walters, who owns the Old Mate’s Place and Old Love’s bars.
“Australians have to sit and cop it and small businesses are made out to be the bad guys,” he said. “But we’re only trying to keep the lights on and making sure our staff and rent are paid.”
Peter Semaan, who runs the Rusty Rabbit Cafe in the inner-Sydney suburb of Darlinghurst, said he raised prices for food and cold drinks by about A$2 on average.
“The feedback’s been okay. I’ve been speaking to the customers regularly about it. They know it’s coming, today was the day,” he said.
SOME BUSINESSES NOT PREPARED
Australian Restaurant and Cafe Association CEO Wes Lambert said some other businesses were not prepared for the surcharge ban despite months of warnings.
“I landed at Brisbane airport this morning, walked out, bought a coffee from a national chain and they were displaying and charging the surcharge,” Lambert said.
“This drives up the costs to small businesses and in the majority of cases, will create a hit to the profit and loss of each business and will be passed on to customers.”
Australian restaurants and cafes generate about A$66 billion in revenue each year and operate on margins of between 2.8% and 3.1%, according to industry data.
Macquarie analysts estimate the interchange fee removal would reduce Australian banking sector revenue by about A$900 million in 2027, representing between 1% and 2% of total earnings. But banks’ cuts to credit card rewards programmes would help offset much of that downside, they said.
The Reserve Bank of Australia and Australian Competition and Consumer Commission have said businesses will still incur costs when accepting card payments. But those should be reflected in their overall pricing rather than as a separate surcharge, they said.
About 16% of businesses currently impose surcharges, according to the RBA. It estimated the aggregate impact on measured consumer prices of the change would be “small”, or around 0.1%.
“In any case, this would only be a small, one-off impact on measured inflation; consumers are already paying these costs via payment surcharges – which are not included in the Consumer Price Index,” the central bank said in a report in March.
($1 = 1.4405 Australian dollars)
(Reporting by Scott Murdoch and Christine Chen; Editing by Jamie Freed)
