Small business backlash builds as RBA’s surcharge ban risks fuelling inflation
Australia’s small business sector has launched a fierce campaign against the Reserve Bank of Australia’s (RBA) proposed ban on debit and credit card surcharges, branding it a “sledgehammer solution” that will drive up prices and threaten thousands of small operators.
The RBA’s plan, now postponed until March, aims to eliminate surcharging altogether. But industry groups say it will simply shift the costs underground, forcing every merchant to embed card fees into their base prices. The result, they warn, will be an across-the-board cost-of-living hike that hurts all consumers — particularly those who pay with cash or low-fee debit cards.
Hidden price hikes ahead
“This will create a system where credit card users get something for nothing and everyone else pays for it,” said the Australian Hotels Association. “Nothing comes for free.”
The Australian Small Business and Family Enterprise Ombudsman echoed the warning: “If their ability to surcharge is removed, merchants will have no choice but to increase prices or absorb these costs, placing further pressure on already struggling businesses.”
The Small Business Development Corporation cited a Perth café that would have been forced to absorb about $20,000 annually if not for small surcharges on card purchases.
Threat to small business survival
For low-margin sectors such as travel agents, cafés and butchers, the change could be catastrophic. The Australian Travel Industry Association noted that some travel agents operate on margins as slim as one per cent and risk losing money on large card transactions.
The Australian Meat Industry Council said smaller retailers “are less able to negotiate lower payment fees and absorb additional costs compared to major retailers.”
Collectively, the Australian Hotels Association estimates, businesses that currently surcharge would be left more than $1 billion out of pocket if the ban proceeds.
Unintended inflation
Opponents also argue the reform is inherently inflationary. When visible surcharges are banned, they say, businesses have no choice but to raise headline prices for everyone. Similar reforms in Europe triggered the same “waterbed effect,” leading to higher overall prices.
The result, critics say, will be a stealth cost-of-living increase that compounds existing household pressures and dulls competitive pricing.
Rewarding laggards, punishing innovators
Industry submissions warn that the RBA’s proposal will entrench the dominance of big banks and global card schemes, discouraging adoption of lower-cost technologies like least-cost routing and new digital payment options.
“SMEs are being crippled by a payments system that consistently advantages large retailers and global card schemes at their expense,” said the Australian Association of Convenience Stores.
Calls for a smarter, targeted fix
With the March deadline looming, opponents are urging the RBA to adopt a more measured approach. Recommended alternatives include:
Limit the ban to debit cards only, or to low-value in-store transactions, as planned in New Zealand.
Mandate least-cost routing by default to guarantee the cheapest transaction option for merchants.
Ban blended rates and cap scheme fees to improve transparency.
Phase in any changes over 12 months to allow time for renegotiation and new fee-management technology.
“The fate of Australia’s small business sector — and every household budget — hangs in the balance,” one submission warns.
