Albo’s inflation own goal

On 1 October, Prime Minister Anthony Albanese boasted on social media that banning card surcharges at stores would save Australians $1.6 billion a year:

“Every time you tap, those little surcharges add up. Right now, they’re costing Aussies $1.6 billion each and every year”.

“But from today, they’re banned”. Saving you money every time you tap”.

“So, whether you are at the supermarket, paying bills or buying a cup of coffee, the price you see is the price you pay”.

As with many other things under this government, the reality has turned out to be the opposite of what was promised.

Merchant fees haven’t disappeared, and stores still need to pay them to banks. As a result, instead of saving shoppers money, many stores have raised prices to cover the fees they must now absorb. And many have raised prices far more than the surcharges consumers would have paid under the old system.

For example, on Saturday night, I took my family to my favourite souvlaki place in Oakleigh, Melbourne, which I had visited two weeks earlier.

All menu prices had increased, most by 50 cents, but the more expensive items (e.g., souvlaki platters) by $1.

As a result, the sticker price of my family’s meal ended up costing $3 more, which is more than I would have paid under the old system with a 1.5% surcharge if I’d paid by card.

However, I usually pay with cash to avoid paying surcharges. Now, with card surcharges gone, I’m still paying a higher menu price even though I’m paying in cash.

Nor is my experience unique. Media reports already note that cafes and restaurants raised their menu prices on 1 October to offset the costs they still pay card providers.

Social media has also reported businesses creating new charges, such as a “daily service charge”, instead.

The upshot is that the Albanese government’s ban on card surcharges is likely to be inflationary, putting further pressure on the Reserve Bank to hike interest rates.

As noted by Wes Lambert, CEO of the Australian Restaurant & Cafe Association:

“The government is bonkers if it thinks this won’t be inflationary. The RBA has woefully underestimated the flow-through. It won’t disappear. It will be baked permanently into higher menu prices”.

The Albanese government’s penchant for spinning bad news into good news is now legendary.

Virtually every policy area it touches seems to make things worse for Australians.