Price Hikes Linked to Credit Card Surcharge Ban, Says UBS
UBS economists have reported that retailers are leveraging the ban on credit card surcharges to implement higher price increases. The ban, effective from 1 October, is part of reforms by the Reserve Bank aimed at enhancing customer transparency and reducing bank fees.
Initially, the Reserve Bank of Australia (RBA) forecasted that businesses would adjust their prices to include bank fees, predicting a 0.1 percentage point rise in inflation. However, UBS has contested this estimate, suggesting it underestimates the situation. They believe that the ban has enabled businesses, particularly cafés, to raise prices further than would have otherwise occurred. While the RBA’s estimate is seen as a minimum, UBS predicts inflation could increase by 0.2%.
A survey by coffee price tracker Small Flat White found that 17% of cafes raised their prices by an average of 50 cents—more than a 10% increase—since the surcharge ban began. This rise significantly exceeds the typical 1.5% card surcharge fee.
According to UBS, “Resilient demand and elevated inflation expectations may enable retailers to use this change as cover to offset broader cost pressures, including wages and fuel.”
The report hints that consumers, accustomed to the rising inflation of recent years, may be more tolerant of such price increases. Examples of ‘round up’ pricing for items like coffee indicate that businesses might be passing on costs more aggressively than the surcharge itself would have suggested.
