From Thursday, Australian businesses cannot add a separate fee when customers pay by card. The government presents the change as cost-of-living relief, but some small businesses say absorbing the fees will squeeze already tight margins and may lead them to raise prices or close.

The Reserve Bank has also cut the maximum interchange fee from 0.80 to 0.30 per cent, and estimates this will reduce businesses’ payment costs by about $660 million a year. Treasurer Jim Chalmers says consumers will save $1.6 billion in surcharges and businesses $910 million annually, though experts disagree on how the changes will affect prices. Melbourne bakery Monarch Cakes says it will raise prices, while a nearby restaurant plans to absorb the charge and a café says it had already increased coffee prices partly in anticipation of the reforms.