Fresh concerns are emerging that Australia's newly enacted ban on card payment surcharges could push inflation higher, after a significant share of businesses responded to the change by raising their prices rather than absorbing the costs. A financial expert has now put a name to the risk, warning the policy carries "every chance" of showing up in the next inflation figures.
The ban, which took effect on 1 October, prohibits businesses from passing card processing fees directly on to customers. The federal government has framed the reform as a win for consumers, with Treasurer Jim Chalmers arguing it would save Australians up to $1.6 billion a year by eliminating surprise fees at the point of sale. But the underlying cost of accepting electronic payments has not disappeared — and businesses are finding other ways to recover it.
One in six cafes have already raised prices
Reports indicate that roughly one in six cafes have lifted their prices since the surcharge ban came into force. Of those businesses that have moved, around one-third have increased the cost of a coffee by 50 cents. The pattern suggests that rather than eliminating the cost to consumers, the ban may simply be redistributing it — folding processing fees into headline prices where they are less visible but still present.
Fort Blake Asset Management founder Christian Bayliss told a breakfast television program on Wednesday that the cumulative effect of these price rises could filter through to broader inflation data. "I think there's some unallowed consequences that we might have to expect as we look forward into the next inflation print," he said.
For context on how Australia's inflation trajectory has evolved in recent years, see our analysis of the current state of Australia's inflation rate.
The hidden pressure: losing credit cards as working capital
Bayliss raised a concern he said had been largely overlooked in public debate — the role that credit cards play as a short-term financing tool for small businesses. Many operators use credit cards to access weeks of interest-free capital, using the float to cover obligations such as BAS and GST payments before revenue comes in.
"A small business will typically use the credit card as a working capital facility," Bayliss said. "It is able to get six weeks to seven weeks of interest-free money to basically pay its BAS, GST payments, and all of those sorts of things. That's now been taken away."
Compounding that pressure, the Australian Taxation Office (ATO) has announced it will cease accepting credit card payments from 30 November. The ATO confirmed that card payments currently represent about 2.3 per cent of all tax payments — a small share, but Bayliss argued those using this method are disproportionately the businesses already under the most financial strain.
"It is a small proportion but it is also typically those small businesses that are running against the red line that are really feeling the pressure of the strained consumption story," he said. He also pushed back on suggestions that businesses are primarily motivated by reward points, arguing many are using credit cards simply to "keep themselves afloat."
"There is every chance that there's upside risk to inflation," Bayliss said, adding that this dynamic had not appeared in any modelling or public commentary he had seen to date. The broader debate around alternative tools to manage inflationary pressure — including proposals involving superannuation — is explored in our report on whether super contributions could be used to fight inflation.
Could the ban revive cash payments — or just shift costs?
Beyond inflation, economists are watching to see how the surcharge ban reshapes payment behaviour. RBA data from its 2025 Consumer Payments Survey showed that 50 per cent of Australians used cash in a typical week — well below the 97 per cent recorded in 2007, but a slight recovery from the 47 per cent seen in 2022.
Some small businesses are expected to respond to the new environment by offering discounts for cash payments — effectively the mirror image of a surcharge. The Australian Competition and Consumer Commission has confirmed this is permissible, provided the non-discounted price is advertised prominently and the discount is disclosed before payment.
Finance academics say such moves are unlikely to dramatically reverse the long-term shift toward electronic payments. Most Australians switched to cards and mobile wallets for convenience and record-keeping rather than price alone, and a modest cash discount at select businesses is not expected to change entrenched habits broadly.
Experts note that small businesses face a structural disadvantage in the new regime. While the RBA paired the surcharge ban with cuts to interchange fees to reduce what merchants pay to accept cards, those savings are not guaranteed to flow through to smaller operators who typically pay bundled rates set by payment service providers. Large retailers with bargaining power can negotiate better terms; corner cafes and independent traders generally cannot.
What happens next
With the ban now in effect and the ATO credit card cut-off approaching at the end of November, the pressure on small business cash flow is set to intensify heading into the summer trading period. Whether that pressure translates into a measurable uptick in inflation will likely become clearer when the next official consumer price data is released. Bayliss's warning suggests the government's reform, however well-intentioned, may carry costs that are only beginning to surface.
