As the cost of living remains a hot topic, our latest insights blend data from our economics team with responses from 2,000 Australians in our quarterly NAB Consumer Sentiment Survey.
This comprehensive look at consumer behavior reveals key trends in spending, saving, and overall economic sentiment.
Value-Conscious Spending
In the face of rising inflation and job security concerns, consumers are becoming more frugal. Adjustments in spending and saving habits are widespread, yet there’s a silver lining: business confidence is climbing. The current economic climate has prompted households to rethink their budgets, leading to more deliberate and value-driven purchasing decisions.
Consumers are managing to save an additional $320 monthly by opting for more affordable alternatives and cutting back in specific areas. Our survey found that 80% of consumers now prioritize price above all else when making purchases. Additionally, 40% are increasing their savings, while 20% are directing more funds towards debt or mortgage payments. Discount retailers are reaping the benefits of this shift, as consumers seek to maximize value without compromising on essential needs.
Spending behaviors differ notably among various demographic groups. For example, those over 65 place a high value on service and reputation, making fewer changes to their spending patterns. Conversely, Gen Z, the demographic making the most significant adjustments, relies heavily on influencers for product recommendations. This generational contrast highlights the diverse strategies consumers employ to navigate financial pressures.
Prioritizing Well-Being
Despite widespread cutbacks, certain expenditures remain steadfast. While 57% of households have reduced their spending on dining out, many continue to prioritize care for loved ones. Only 23% have cut back on pet-related expenses, and a mere 14% have reduced spending on children’s activities.
Health and wellness remain crucial, with just 23% scaling back on private insurance and gym memberships. This indicates that while consumers are tightening their belts, they still allocate funds for essential and enriching aspects of life.
According to NAB Economics, the cash rate is expected to hold steady at 4.35% until May 2025. Looking further ahead, forecasts predict a drop to 3.6% by December 2025, with further reductions anticipated in 2026. This stability offers a measure of predictability for both consumers and businesses, aiding in financial planning and investment decisions.
Rising Business Confidence
Business confidence has seen a notable increase, rising by six points to reach +4, the highest level since early 2023. This uptick is driven by a broad-based improvement across various industries, even as overall business conditions have declined slightly. Capacity utilization has climbed to 83.5%, significantly above the long-term average, indicating that businesses are operating more efficiently and making better use of their resources.
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