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.
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)
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
|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
|MP Base Salary||$3,983|
|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|
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 %
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
Source: ABS 6523.0 2015-16
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.