Small businesses abandoned: RBA card surcharge move slammed by SA hospo owner
The owner of multiple Adelaide hospitality venues says the Reserve Bank’s move to slash card surcharges may mean pricier beer, as fresh warnings emerge over insolvencies in SA.
Surcharge fees on debit and credit card transactions will be ditched, the Reserve Bank of Australia announced today, despite fierce opposition from the hospitality industry.
The Reserve Bank’s review of merchant card payment costs recommended the fees be scrapped on EFTPOS, Mastercard and Visa transactions because they do not help consumers make more efficient payment choices and cost shoppers about $1.6 billion a year.
“Consumers are estimated to be paying $1.6 billion of a total $1.8 billion in card payment surcharges charged each year on designated card networks,” the RBA said.
“The surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices.
“The increased prevalence of businesses surcharging all cards at the same rate, challenges with enforcing the current surcharging framework, and consumers using less cash have reduced the effectiveness of the surcharging regime.”
It was welcomed by newly minted Small & Family Business Minister Nadia Clandy, who said, “The lowering of caps on interchange fees paid by businesses should also provide a boost for small and family businesses because they often pay fees closer to the existing caps”.
But the Big Easy Group co-founder Oliver Brown, who runs popular Adelaide venues like The Stag, La Louisiane, Nola and Tarantino’s, told InDaily the decision “doesn’t make any sense”.
“We talk about aiming for 10 per cent profitability, and that’s a fine line enough as it is, but that includes passing on the surcharges,” he said.
“If you remove that, you’re going to remove 15 to 20 per cent of a business’s profit overnight.
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“All it’s going to do is push prices up.”
He said the decision would compound pressures on small businesses in South Australia that are facing rising fuel prices, materials costs and wages.
“It’s also going to be in line with the increase in wages on the award above CPI in the middle of the year, and all of our prices are going up with fuel charges and increased costs.
“All they’re doing is compound in on an industry which already has one in 10 venues closing.”
Such is the pressure on South Australians that this Saturday, Brown will play “personal chauffeur”, and pick up a “few lucky people” in his own car who have bookings at one of his restaurants.
South Australian Business Chamber general manager Kendall Crowe said that while removing surcharges would “reduce friction” for consumers, “it’s important to recognise that the underlying costs for businesses don’t disappear”.
“While the RBA says these changes will mean simpler, more transparent pricing, the test will be whether businesses are left better off, not worse,” she said.
The Australian Hotels Association said the move “doesn’t pass the pub test”, saying the “needs of consumers and businesses alike have been ignored”.
AHA CEO Stephen Ferguson said the winners from the move would be “foreign-owned companies like Visa, Mastercard and the big banks”.
“It’s all smoke and mirrors – consumers and small businesses have been abandoned in the middle of a cost-of-living crisis,” he said.
He said the cost of a coffee or beer wouldn’t decrease as a result of the decision, asking: “What was the purpose of the whole exercise if it wasn’t to decrease costs for consumers?”.
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The central bank will also lower the caps on interchange fees paid by Australian businesses, saving consumers about $1.2 billion.
The fee is paid by a business to a customer’s card issuer when a transaction occurs.
It comes amid fresh insolvency warnings for South Australian businesses that are staring down pressures on multiple fronts.
National insolvency firm Jirsch Sutherland warned this week that insolvency levels in South Australia were expected to climb as rising operating costs, fuel prices, tax office enforcement and tightening cash flow conditions continue to take hold.
SA-based Jirsch Sutherland partner Yulia Petrenko said construction, hospitality and retail businesses were the most exposed to the economic shocks.
“The operating environment has shifted significantly over the past 12 to 18 months,” she said.
“We’re seeing a combination of ongoing ATO enforcement, rising interest rates, fuel costs and broader cost-of-living pressures all impacting businesses.
“For many, the pressure is no longer temporary – it’s structural.”
The RBA’s decision would have a negative impact on SA businesses too, she said.
“The decision sounds good in theory, but in reality, South Australian small businesses are already facing significant financial headwinds in the current economic conditions, caused by increasing interest rates and higher business operating costs and, most recently, increasing prices of fuel,” she said.
“Lowering operational expenses would be a challenging task, and forced price increases might potentially cause customers to ‘shop elsewhere’.
“This will most likely have a negative impact on small business owners, adding further pressure on them and potentially pushing them out of business.”
She warned the impact on businesses could flow on to individuals, noting the Australian Tax Office was issuing penalty notices to directors: “We’re seeing more individuals exposed to personal liability for company debts”.
“Individuals are under increasing pressures from mortgages, living costs and tax obligations, and that inevitably flows through to business owners.
“I expect both business and personal insolvencies in South Australia to trend upward. Historically, SA has been more stable than larger eastern states, but that gap is narrowing as economic pressures persist.”
– with AAP
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