The land down under is no exception from the global cost of living crisis.
The increasing cost of things like rent, groceries, and fuel have weighed Australian consumers down. They have a bleak outlook on the economy, impacted by the price increases they’re seeing on a day-to-day basis. They’re making changes as a result: checking out discount grocers and retailers, cutting back on streaming services or out-of-home entertainment, and even improving their financial literacy through specialized courses.
We’ll explore certain aspects of how Australians view their economy, what they’re cutting back on, where they need help, and how brands can build consumer trust despite a less-than-ideal financial market.
What’s the economic sentiment like in Australia right now?
Broadly-speaking, Australians are pessimistic about the economy. Many expect inflation to increase, and their outlook on their personal finances and the country’s economy are near an all time low.
Compared to other OECD markets, however, it’s a bit different; Australians are generally more optimistic than those in markets like the UK, France, and Japan. Moreover, younger consumers tend to have a far more positive outlook, as do Australians in urban areas, and more populous states like New South Wales or Queensland. With greater job opportunities and higher wages to be found here, it makes sense in context – especially since rural states may not have the same privileges.
It’s worth remembering consumers don’t tend to base their outlook on things like GDP or the stock exchange; Australians are no different.
Instead, changes in their day-to-day life is the leading influencer on how they view the economy – and how they respond in turn. For example, with food inflation reaching its highest point since 2006, Australians have started turning to cheaper grocery stores like 7-Eleven and Aldi across the past 5 years. That said, traditional giants like Coles and Woolworths are still trusted brands, and consumers are responding positively to the pricing wars between the two.
Banks and governments still have some influence, like updates from the Reserve Bank of Australia. Consumers will welcome the news that interest rates will be on hold for the first time in a year, and this could lead to more spending, and greater economic confidence in turn. It all depends, however, on whether consumers feel the effects here; if not, then it’s unlikely habits will change.
Financial literacy is just as important as savvy spending
With all this economic uncertainty, many Australians are feeling the need to improve their financial literacy. Nearly one in four Australians have investments in the stock market, but they’re more likely to prioritize riskier investments like cryptocurrency over traditional “safer” options like mutual funds and bonds.
When it comes to saving for a rainy day, 23% of Australians say they don’t have enough savings to cover even one month of basic living expenses. This is particularly alarming for baby boomers, who are approaching retirement age and may not have sufficient funds to support themselves down the line. These figures highlight the clear need for improved financial assistance to ensure that individuals are equipped with the knowledge and tools required to make informed decisions about their financial future.
28% of baby boomers in Australia don’t have enough expenses to cover one month of basic living expenses.
For the most part, Australians would like advice from certified financial advisors (CFAs). Banks should also be on standby; 75% say they should provide support for customers’ financial wellbeing. There’s certainly a gap that needs addressing here, however, since just 34% say that their bank actually offers this, with baby boomers feeling the least supported.
Banks, especially large ones like Commonwealth and ANZ, have a key opportunity to reach out to customers and offer financial education. This doesn’t need to happen in 1:1 conversations; some banks are even exploring TikTok to reach younger audiences – it’s all about identifying each person’s needs, and how financial assistance fits into their lifestyle.
Saving for retirement, budgeting, and debt guidance are all relevant topics for Australians, so offering courses to consumers could go a long way to build brand trust – which is more important now than ever. Only a quarter of Australians trust financial institutions, but that can tick up with quality service and protecting consumer data. Banks, especially large ones, need to dedicate as many resources to these facets while reaching out to customers to offer financial education.
How Australians are spending their money
The top thing on Australians’ minds when it comes to spending right now are the essentials. Aussies are dedicating more of their household income to paying off bills/expenses, with 14% estimating that over 75% of their monthly income covers essential expenses, up from last year’s amount.
Increasing rent certainly contributes to this. A third of Australians rent accommodation – much higher than the 17% of renters worldwide. Not only that, but mortgage rates are just too high for some, potentially explaining why less than half of Australians are interested in buying property. This, however, doesn’t mean they’re not spending; there’s room for smaller home purchases instead. Australians are dedicating more resources to fix up and improve their properties. In fact, some of the best retail performers 2022 were hardware/DIY stores Home Timber & Hardware, and Bunnings.
Australians are shifting to more fuel-efficient cars with fuel being so expensive.
Housing isn’t the only essential purchase seeing a price hike. Three-quarters of Australians drive weekly, and with fuel prices the highest they’ve been since 2015, owners are shifting to more fuel-efficient cars. Since Q3 2021, there’s been a 34% increase in hybrid or electric car owners, as well as a rise in diesel vehicles, known for their fuel efficiency.
While Australians are cutting back on excess spending, they’re not putting on the brakes entirely. There’s still room in their budget for non-essentials too.
That might mean cutting back on regular drinking – with weekly alcohol consumption in Australia being 3rd overall worldwide. 37% said they’d spend less on alcohol, and nearly half said they could cut back on nights out.
The same can be said for luxury goods and subscriptions. Only 39% of Australians made a luxury purchase in the last year, less than Western markets like Germany, Italy, and Spain. Instead, going to secondhand stores is on the rise. Nearly 1 in 5 are planning to buy secondhand clothes to save money, and even more want to sell things they own, increasing supply at these op-shops.
In entertainment, subscriptions could soon be on the chopping block. Over 1 in 5 plan to cancel their subscriptions – second only to the UK. Australia is a huge market for streaming, with consumers more likely than most Western markets to subscribe to an online subscription of some sort. As such, it’s important for brands to find other ways to compete. Not everyone can slash their prices, so it’s vital that they understand the kinds of content which lands down under, and what other factors come to mind when paying for streaming subscriptions.
Lastly, vacations are still very much on Australians’ minds but they’re more than happy to have a staycation if it means saving money. Nearly 3 in 10 Australians have been on a domestic vacation in the last 6 months, and many have one planned soon – and who can blame them? Australians generally prefer beach vacations, so tourist boards and travel agencies need to emphasize the value in traveling within their borders.
How to win with Australian consumers
It might sound strange but price isn’t everything. Make no mistake, cost is undoubtedly the most important factor at this time, but Australians are on the lookout for ways to get more for their money. It’s all about adding value beyond cost, like the availability of products – which is understandable given recent supply chain issues.
Offering high-quality products is a surefire way to build brand trust. Australians want their brands to be reliable and authentic, which makes a lot of sense in a slowdown; having to repurchase products can negatively impact consumers’ perception of a brand. With trust in short supply, it’s important for brands to take this into account and shout about the quality of their products.
With 38% of Aussies purchasing a product/service online every week, brands have an opportunity to bolster their online marketplaces in order to keep consumers happy and win their trust.
It’s mostly about nailing the little things. Beyond price, free delivery is by far the biggest influence when buying a product, but loyalty/rewards programs play a role too – especially since they encourage returning customers. That being said, Australians are also fond of click & collect. Nearly 75% of Australian consumers drive every week, so getting on the road is no issue for them. Not only is it a marriage of online and brick-and-mortar storefronts, but of convenience and gratification for consumers as they experience the convenience of online shopping, but don’t have to wait (or pay) for delivery.
In times of hardship, consumers are generally more focused on problems that affect them, meaning things like eco-friendliness and social justice are often considered more of a luxury problem. That doesn’t mean leaving them behind, however. Australians still value brands’ commitments to sustainability or their stance on social issues, so brands who can stand by their values and help consumers make savings will be at an advantage.
The land down under low down: the key takeaways
Australians are feeling pessimistic about the economy and their personal finances. Many are making changes to their spending habits — without cutting spending entirely.
Likewise, they’re on the lookout for more than just a discount. Reliable and high-quality products are essential for building brand trust among Australian consumers, while brands that can meet online purchase drivers like free delivery and rewards programs could be well-positioned for success in the coming year.
By understanding the challenges and opportunities facing Australian consumers, businesses can better meet their needs and thrive in an economy that might have more losers than winners. Tough times creates the need for reliable partners, and brands have the opportunity to be just that.