Australians are cutting back on takeaway coffee as petrol prices and other living costs surge, raising fears that the broader economy may soon follow suit. Surveys show more than half of consumers are reducing spending on treats like coffee and snacks, which are usually among the last purchases to be cut.
The trend accelerated in March when petrol prices spiked due to the US-Israel conflict with Iran. Many cafes report a slowdown in what patrons are purchasing, with some customers switching to home-brewed or petrol station coffee. The Westpac-Melbourne Institute consumer sentiment index recorded its sharpest monthly decline since the pandemic began.
Wes Lambert, chief executive of the Australian Restaurant & Cafe Association, describes a 'great coffee standoff' between cautious customers and businesses forced to raise prices. The average maximum price Australians are willing to pay for a coffee is A$6.60, a threshold some cafes are now breaching.
AMP chief economist Shane Oliver warns that the global economy is 'getting closer to crunch time'. He notes Australia is particularly vulnerable due to its heavy reliance on oil imports, and fuel rationing may be needed if the Strait of Hormuz disruption continues beyond next month, raising the risk of recession.
However, NAB behavioural economist Dean Pearson urges caution: 'Our forecasts suggest consumption is easing, not collapsing.' Some of the decline may reflect changed work habits, with more people working from home following government advice to conserve fuel. Households are being cautious – adding extra tinned goods to shopping trolleys and sharing restaurant meals – but not bracing for a full-blown downturn.
