Heroes of $7 coffee

Advertisement

The waste of space formerly known as the media had a good laugh at your expense over the weekend, that you can still afford or want to pay $7 for a coffee. SMH.

Coffee roasters and baristas are the unsung heroes of Sydney hospitality. It takes a special person – part scientist, part artist, and part sustainability advocate – to take coffee beans and craft them into caffeinated magic. The teams at these cafes and coffee shops are some of the best.

Actually, it takes somebody desperate to stand up all day doing nothing. That is setting the bar for “special” so low that it would include most crawling insects.

If one were to look at the following chart, we might think that there was hope for occupying the hands of these idle folk.

Advertisement

Better weather in the latitudes of the Americas and demand destruction from the price spike are starting to bring the price down. Global inventories are creeping up as well.

The problem is, coffee is not the problem. Everything else is.

Advertisement

This mix is not that out of step with other nations. Most are roughly two-thirds rent and wages, though the split differs.

What is different is that Australian real incomes have not kept pace in the same way as they have elsewhere, and so the recent coffee spike has been felt more keenly.

Advertisement

The really bad news is that coffee price rises are, in fact, cheap versus the broader CPI!

And there is no obvious fix coming for real incomes; cafes will continue to close.

Advertisement

And, eventually, the new equilibrium price for a coffee will have to settle much higher than it used to be as supply is rationalised.

The heroes of $7 coffee are here to stay.

Advertisement
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.