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

For many coffee drinkers, takeaway orders are changing from a habitual purchase to an occasional treat, as elevated petrol prices and other living costs leave households feeling glum.This rapid shift in behaviour has disappointed cafe owners and surprised economists, raising an uneasy question: if takeaway coffee sales are falling, is the economy next?Changes in coffee purchases are an early indicator of consumer attitudes because Australians are generally unwilling to give up their daily habit until absolutely necessary.National Australia Bank research shows that more than 50% of consumers are cutting back on treats such as coffee and snacks, which the bank says are usually among the most resilient purchases.While the trend has been in place for a few months, it accelerated quickly when petrol prices ignited in March due to the Iran conflict.“We are hearing from cafes and restaurants around the country that they’ve seen a slowdown in what patrons are purchasing,” says Wes Lambert, chief executive of the Australian Restaurant & Cafe Association.“Unfortunately, it could lead to increased home and petrol station coffee consumption which would be a crying shame in Australia, a country that is famous for its barista coffee.”Sign up for the Breaking News Australia emailThe consumer pessimism has been confirmed by multiple surveys, including the closely watched Westpac-Melbourne Institute consumer sentiment index, released last week, which recorded its sharpest monthly decline since the onset of the pandemic.The deterioration in confidence has been rapid, with many households feeling upbeat just a few months ago, before mortgage and petrol price increases – and a souring global economic outlook – took hold.Lambert says there is a “great coffee standoff” between cautious customers and businesses that need to lift prices due to rising costs.A February report by payments company Tyro found that the average maximum price Australians say they’re willing to pay for a coffee is $6.60, a price ceiling some cafes are breaking.‘Closer to crunch time’While weakened economic activity, high fuel prices and rising inflation are weighing on the Australian economy, forecasting has become particularly challenging due to uncertainty over how the Middle East conflict might be resolved.AMP’s chief economist, Shane Oliver, says the global economy is “getting closer to crunch time” because the longer the disruption to oil supplies continue, the greater the risk of recession.He says Australia is particularly vulnerable given its strong reliance on oil imports.“Our rough estimate is that if the flow of oil through the [strait of Hormuz] does not quickly resume we could survive till late next month but beyond that fuel rationing would likely be required, which would mean a direct reduction in economic activity and the likelihood of recession,” Oliver says.Dean Pearson, head of behavioural economics at Nab, says during tough times people would usually stick with “affordable luxuries” like a daily coffee, even as they cut back in other areas.He says the consumer change is a response to the psychological blow of seeing high and rising prices for everyday items like coffee and fuel.“That means skyrocketing costs are having a big impact on how people are feeling 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 would suggest consumption is easing, not collapsing. In some ways you can look at people who are cutting back as a really important way to take back control in an environment of extreme uncertainty,” Pearson says.Some of the downturn in coffee spending may also be caused by changed work habits, following advice from the Australian government and the International Energy Agency to conserve fuel for essential services such as farming, freight and emergency services.Those working from home typically reduce the number of takeaway coffees and bought lunches they consume each week.Scaling back on luxuriesOther consumer behaviour also suggests households are being cautious, but not necessarily preparing for a full-blown economic downturn.Households have been throwing an extra can or two of tinned goods into their shopping trolley, while resisting the urge to panic-buy. People are still eating out – but are sharing meals at restaurants to save some money.Others are struggling more, and are now spreading their payments for essentials like groceries, petrol and utility bills over several instalments as their budgets tighten.Spending data from Zip shows there has been an increased use of its ‘buy now, pay later’ platform over the past three months for essential items including utilities, insurance, education and health.A Zip spokesperson says the platform also recorded “increased spend on fuel from February to March 2026”.Gary Mortimer, a professor of marketing and consumer behaviour at Queensland University of Technology, says people are starting to adjust their budgets, but not panicking.“You may not be able to cut your mortgage repayments or rent, but you can scale back on streaming subscriptions and on that morning coffee, because they are a bit of a luxury,” says Mortimer.“People will be starting to bring leftovers to work, because that saves 15 bucks for lunch.”