Australians love their coffee – but at what cost?
75% of the population drinks coffee, and nearly 30% of us consume more than three cups a day. As coffee prices rise, it’s worth asking, how much is our daily caffeine fix really costing us?
The rising cost of coffee in Australia
The average small flat white now costs $4.78 in Australian capital cities. If you buy one every day, that adds up to over $1,700 per year. For those drinking three or more café-made coffees a day, the yearly cost skyrockets to $5,200.
Even at these prices, Australia is still relatively cheap compared to global cities:
- Basel, Switzerland: $10.16 per coffee
- Athens, Greece: $9.95
- Dubai, UAE: $10
- London, UK: $7
Why are coffee prices increasing?
Several factors are pushing coffee prices higher:
- Inflation & cost of living increases. Rising wages and general inflation are driving up café costs.
- Supply chain disruptions. The pandemic affected global shipping, causing shortages and higher freight costs.
- Rising demand. Global coffee consumption grew 5% last year, outpacing supply.
- Climate issues. Major coffee producers Brazil and Vietnam have faced drought, reducing supply.
The opportunity cost of your daily coffee
While coffee is a small luxury, Jovan Cvetkoski, a leading financial adviser, suggests considering alternative ways to use that money:
1. Investing in shares
If you invested $2,000 per year in an index share fund with an 8% annual return, you’d have nearly $29,000 after 10 years.
2. Paying off your mortgage faster
Using $2,000 per year for extra mortgage repayments on a $500,000 home loan at 6.5% interest could:
- Save $8,000 in interest over 10 years
- Reduce your loan balance from $423,000 to $395,000 in the same period
- If you drink two coffees a day, your savings over 10 years would exceed $16,000
3. Boosting your superannuation
Because super contributions are taxed at a lower rate, they’re a powerful way to grow wealth. Redirecting $3,000 per year into super (pre-tax) could:
- Add nearly $5,000 per year into your fund
- Grow to almost $55,000 in value over 10 years, including $7,000 in tax savings
Should you stop drinking coffee?
Absolutely not. If you enjoy it and can afford it. However, with rising prices, some Australians are switching to instant coffee to cut costs. Meanwhile, local cafés are struggling with higher expenses and fewer customers, meaning support for independent businesses is more crucial than ever.
The key takeaway? Small spending habits add up over time. Being mindful of where your money goes—and making informed financial choices—can help you build long-term wealth.
Need smarter financial advice?
If you’re looking for personalised financial advice, Jovan Cvetkoski and the Knight team can help you create a strategy that aligns with your goals. Contact us today to start making the most of your money.
Frequently Asked Questions
1. How much does the average Australian spend on coffee per year?
The average Australian who buys one small flat white daily spends over $1,700 per year. For those drinking three or more café-made coffees per day, the yearly cost can exceed $5,200. This small daily expense adds up significantly over time.
2. Is cutting back on coffee a smart financial decision?
Reducing your coffee purchases can free up money for investments, mortgage repayments, or super contributions. For example, redirecting $2,000 per year into an index share fund could grow to $29,000 in 10 years, while extra mortgage payments could save thousands in interest.
3. What are some alternative ways to invest money instead of buying coffee?
Instead of spending money on daily coffee, you could:
- Invest in shares, aiming for long-term compound growth.
- Make extra mortgage repayments, reducing interest costs.
- Boost superannuation contributions, benefiting from tax savings and long-term gains.
For personalised financial advice, Jovan Cvetkoski at Knight can help you create a smart money strategy.
