Takeaway coffee sales plunge as fuel and living costs dent Australian spending. Is the economy next? | Economics

For many coffee drinkers, takeout orders are shifting from a habitual purchase to an occasional treat as rising gas prices and other living costs throw households into gloom.

This rapid change in behavior frustrated cafe owners and surprised economists; This raises an uncomfortable question: If takeaway coffee sales are declining, is the economy next?

Changes in coffee intake are an early indicator of consumer attitudes because Australians are generally unwilling to give up their daily habits unless absolutely necessary.

National Australia Bank research shows more than 50% of consumers are cutting back on treats such as coffee and snacks, which the bank says are often among the most resilient purchases.

Although this trend has been ongoing for several months, it quickly accelerated in March when oil prices rose due to the conflict in Iran.

“We’re hearing from cafes and restaurants up and down the country that they’re seeing a slowdown in customer purchases,” says Wes Lambert, chief executive of the Australian Restaurant and Cafe Association.

“Unfortunately, in Australia, a country famous for its barista coffee, this could lead to increased coffee consumption in homes and at petrol stations, which is a great shame.”

Consumer pessimism has been confirmed by numerous surveys, including the closely watched Westpac-Melbourne Institute consumer sentiment index, which was released last week and recorded its sharpest monthly decline since the start of the pandemic.

The breakdown in trust was rapid; Just a few months ago, before mortgage and oil price increases and a worsening global economic outlook emerged, many households were feeling optimistic.

Lambert says there’s a “huge coffee divide” between wary customers and businesses forced to raise prices because of rising costs.

A report published in February by payments company Tyro found that the average maximum price Australians were willing to pay for a coffee was $6.60, with some cafes exceeding that price ceiling.

‘Closer to crisis time’

Weakening economic activity, high fuel prices and rising inflation have put pressure on the Australian economy, while forecasting has become particularly challenging due to uncertainty about how the Middle East conflict might be resolved.

AMP chief economist Shane Oliver says the global economy is “approaching a critical period” because the longer the oil supply disruption lasts, the greater the risk of recession.

He says Australia is particularly vulnerable given its strong dependence on oil imports.

“Our rough estimate is that if the flow of oil [strait of Hormuz] “If it doesn’t resume quickly we can survive until late next month, but beyond that there will probably be a need for fuel rationing, which would mean a direct reduction in economic activity and the possibility of recession,” says Oliver.

Dean Pearson, head of behavioral economics at NAB, says that in tough times, people will often stick to “affordable luxuries” like their daily coffee, even as they cut back in other areas.

He says the consumer shift is a response to the psychological hit of seeing high and rising prices for everyday items like coffee and fuel.

“This means rapidly rising costs are having a huge impact on how people feel about the state of the economy and their household budgets.”

But he warns against over-interpreting what the coffee trend means for Australia’s economic outlook.

“Our forecasts show that consumption is easing rather than collapsing. In some ways, you can look at people cutting back as a really important way of taking back control in an environment of extreme uncertainty,” says Pearson.

Some of the decline in coffee spending may also be due to changing working habits following recommendations from the Australian government and the International Energy Agency to save fuel for essential services such as farming, transport and emergency services.

Those who work from home often reduce the number of takeaway coffees and purchased lunches they consume each week.

Shrinking in luxury consumption

Other consumer behavior also shows that households are cautious but not prepared for a full-blown economic crisis.

Households are tossing an extra box or two of canned goods into their shopping carts as they resist the urge to panic buy. People are still eating out, but they’re sharing meals at restaurants to save money.

Others are struggling more and are splitting their payments for basic needs like food, gas and utility bills into several installments as their budgets tighten.

Spending data from Zip shows that usage of the buy now, pay later platform has increased over the past three months for essential needs like utilities, insurance, education and healthcare.

A Zip spokesperson said the platform also noted “an increase in fuel spend from February to March 2026.”

Gary Mortimer, professor of marketing and consumer behavior at Queensland University of Technology, says people are starting to adjust their budgets but not panicking.

“You might not be able to reduce your mortgage payments or your rent, but you can reduce streaming subscriptions and morning coffee because those are a bit of a luxury,” says Mortimer.

“People will start bringing leftovers to work because it saves $15 on lunch.”