The number of cafes has grown dramatically across Australia during the last two decades.
When I moved to Melbourne’s Ashburton area in 2006, my local High Street strip shop had about four cafes.
Over the next 18 years, I observed the number of cafes grow to ludicrous numbers.
There are now more than a dozen cafes on or near High Street, the majority of which remain unoccupied during the day.
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The story is the same across Melbourne, and certainly across Australia.
While a select few coffee shops are thriving and attracting large customer bases, the majority struggle to make ends meet.
The fact is that there are too many coffee shops to keep up with the rising cost of living. With mortgages and rents soaring, who can afford $5 for a lukewarm cup of coffee and $20 for eggs on avocado toast?
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Earlier this month, The Australian reported that Reported who “Twice as many hospitality businesses are going bankrupt than they were a decade ago.”
The claim came in response to ASIC data showing that more than 1,600 companies in the accommodation and food services sector became insolvent in the 2023-24 financial year.
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The jump in bankruptcies came on the heels of “Average food prices have increased by 30% over the past three years.” And “High energy bills.”
Independent Food Distributors Australia CEO Richard Forbes has warned that “The number of food service businesses going bankrupt will continue to rise.” And that Australians may be Heading for $10 cappuccinos and $100 steak and chips.
The latest card tracking data from Westpac Bank shows that spending on hospitality services fell sharply, despite strong inflation (4.0%) and population growth (2.5%):
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A radical change in the coffee shop scene would be good for the nation, as it would free up labor and capital for more productive activities.
However, in the short run, it will be painful for low-skilled workers, who are already in a large oversupply:
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The record high number of international students is partly behind the boom in low-skilled workers:
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As the Migration Review report notes, international graduates are also overwhelmingly employed in low-skilled jobs such as hospitality:
Consequently, young Australians may face a sharp increase in unemployment rates as a combination of high labour supply and slow job creation.
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