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Commentary

The Real Price of a Cup of Coffee

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Energy Consumers Australia

Have you ever heard a politician, or a businessman, tell you that some price increase is ‘no more than your daily cup of coffee?’

How much does a cup of coffee cost? In dollar terms, that depends on where you live and what kind of coffee you like. Conveniently on 17 November 2017 card processing company Square published a Coffee Report.[1]

That report tells us how much different coffees cost in different states and territories and how many of us like each type of coffee: (see figure below)

Coffee The Real Price of a Cup of Coffee

The national average is neither the straight average nor a population weighted average for each coffee type so we can only infer that it is weighted by relative coffee popularity by State or Territory.

Combining both data sets gives us a simple ‘representative coffee price’ of $4.13.

Table 1: Representative coffee price

COFFEE TYPE REPORTED NATIONAL
AVERAGE
PROPORTIONS
Cappucino $4.10 16%
Chai $4.39 2%
Flat White $4.06 24%
Hot Chocolate $4.14 4%
Iced Chocolate $5.42 3%
Latte $4.12 39%
Long Black $3.83 8%
Mocha $4.29 4%
Representative coffee price $4.13

 

Table 1 source: Square Coffee Report

But what is the significance of this number? The table below lists the pre-tax weekly income of a representative sample of people in Australia.

Table 2: Weekly sample income per energy market position

SAMPLE INCOMES WEEKLY
Chair, ACCC $14,629
Chair, AER $10,449
MP Base Salary $3,983
Prime Minster $10,355
Cabinet Minister $6.870
Senior Network Engineer $2,221
MD of Network Owner $38,396
Average Weekly Earnings $1,653
Single Newstart with Dependents $590
Single Aged Pension $908

 

Table 2 source: Remuneration Tribunal[2], ABS, Dept of Human Services[3], Company Annual Report and payscale.com[4]

Using this weekly income data and our ‘representative coffee price’ we can derive the percentage of weekly income that a coffee a day would represent for each of these individuals. This is provided below and ranges from a low of 0.08% for the MD of Network Owner through 0.42% for a cabinet Minister to a whopping 4.9% for a single with dependents on Newstart.

 

A coffee a day is a lot of some people’s income

Graph 1: Daily Coffee as Income %

Daily-Coffee-as-Income The Real Price of a Cup of Coffee

This approach only uses the reported gross payments for these jobs, while our coffee (and energy bills) are paid for from disposable (post-tax) income. The chart below shows the cumulative distribution of weekly disposable income and what a cup of coffee a day is for each income.

Graph 2: Equivalised disposable income cumulative distribution and coffee as % income

Equivalised-disposable-income-cumulative-distribution-and-coffee-as-income The Real Price of a Cup of Coffee

Source: ABS 6523.0 2015-16[5]

 

Summary

For people on the median income, a cup of coffee a day is more than 3% of their disposable income. For more than 80% of the population a cup of coffee a day is more than 2% of disposable income.

When someone is relating a price rise to your ‘daily coffee’ they are telling you more about their income than they are about the price impact on households.

[1] https://squareup.com/au/townsquare/2017-square-australian-coffee-report

[2] https://www.remtribunal.gov.au/

[3] https://www.humanservices.gov.au/individuals/services/centrelink/age-pension/eligibility/payment-rates

[4] https://www.payscale.com

[5] http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0

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