Why your morning coffee is still getting more expensive

For millions of Australians, the day doesn’t properly start until their first cup of coffee. But that daily ritual is costing more than it used to - even as some cost pressures, including coffee bean prices, begin to ease.

While global coffee prices have started to come down from recent highs, the cost of a cafe coffee remains stubbornly elevated, driven by higher wages and ongoing pressure on hospitality businesses.

Coffee prices remain high at the counter

The average price of a flat white has jumped 30 per cent since Covid. In Sydney and in Perth, customers are paying about $6.50, while in most other capital cities the average is around 50 cents less.

Australians spend about $8bn a year on coffee, with McDonald’s alone accounting for roughly $1bn in coffee sales.

Despite some easing in wholesale coffee prices, those savings have not yet flowed through to cafe menus.

Source: Torrens University Australia

Employee costs and bean prices are the biggest factors

CommBank economist Harry Ottley says labour costs remain a major factor in the cost of a barista-made coffee.

“The biggest one is the increase in labour costs for the people actually making the coffee at the cafe. Labour costs in the hospitality industry have increased by 30% over that period. But the cost of the coffee beans themselves has also increased by well over 200% ,due to weather disruptions in countries such as Vietnam and Brazil,” he said.

“And that's really created a lot of pressure for the cost of coffee as well.”

Climate impacts still shaping coffee costs

Much of the earlier surge in coffee bean prices was driven by extreme weather in key growing regions.

Brazil and Vietnam, which together produce more than half of the world’s coffee, have faced significant climate-related disruptions in recent years. Brazil is recovering from its worst drought in 70 years, while Vietnam has experienced both drought and severe flooding.

These conditions hit harvest yields and pushed both arabica and robusta coffee bean prices to record highs.

While global bean prices are now easing as supply conditions improve, cafés are still dealing with the after-effects of those earlier shocks.

Other costs are also keeping prices high

Ottley says coffee beans are only one part of the cost of making a cup of coffee, and other expenses remain elevated.

“As well as the input costs that go directly into the cup, there's also a lot of other factors that make it more expensive for businesses,” he said.

“So, if we think about things like utilities, insurance costs, rent costs, all those things have been increasing all across the economy.”

“It is a good representation of why there is so much pressure on business costs and to increase selling prices.”

Cafes are absorbing some of the pressure

Australia’s cafe sector is large and under strain.

In 2025 there were more than 27,000 cafes and coffee shops across the country. Together, they employ over 139,000 people and contribute to a $14bn industry, according to according to IBISWorld data reported by the ABC.

The Australian Restaurant and Cafe Association says many cafes are holding back from lifting prices further, despite rising expenses.

High competition and softer demand mean businesses are absorbing some of the cost pressure themselves. Profit margins across the sector have fallen from about 3.5 per cent to 2.5 per cent.

That squeeze leaves little room for cafes to cut prices, even as some input costs ease.

The bottom line

Coffee prices show how easing costs at the global level don’t always translate to cheaper prices at the counter. While coffee bean prices are coming down, higher wages and other business expenses mean cafés are still under pressure.

For now, Australians may need to keep paying a premium for their morning coffee - even as some of the costs behind the scenes begin to ease.