Uncertain global markets and cost-of-living pressures have shaken consumer confidence in 2025, with the latest data from market research company, Circana, showing promotions and discounts continue to dominate Australian shopping habits. However, the CommBank Household Spending Insights (HSI) Index rose for the third month in a row in June, suggesting stabilisation is on the horizon.
Circana managing director APAC, Paul Hinds, said shoppers are still choosing to remain frugal in the uncertainty of global tariffs and a changing geopolitical climate.
“For retailers, the road ahead is complex with contradictory and opposing realities requiring them to expand and cut simultaneously to meet changing shopper needs,” said Hinds.
“However, there are signs of a turning point over the next six months so if brands can continue to stretch to meet consumer needs with innovative and high value products we will see industry growth.”
Shopping trends revealed
Analysing current food and grocery trends, Circana’s insights reveal a retail landscape marked by contradiction, complexity and cautious optimism, presenting challenges and opportunities for brands.
Consumer confidence remains fragile with global tariffs, geopolitics and economic outlooks creating an uncertain environment.
This is resulting in contradictory and opposing realities for brands, particularly in range and assortment – with cuts and expansions happening simultaneously based on shopper desires.
While cost-of-living pressures persist, there are signs of a turning point over the next six months with further anticipated rate cuts set to support income growth – as the recent tax cuts have done – and boost retail performance.
Two in five Australians rank lowest prices as ‘extremely important for where I shop’, 82 per cent of shoppers are ‘promo loading’ – stocking up when products are on sale – while 81 per cent are actively seeking out promotions and discounts.
Transactions are in a marginal decline, however, items per basket have increased, offsetting the decline in visits and the softening in price growth.
Circana head of media analytics and insights, Alistair Leathwood, said shoppers are exercising greater discretion with their spending, prioritising essentials and pulling back on non-essential goods such as alcohol.
“At the same time, Circana research reveals Aussies are willing to pay a premium for better quality (+15 percentage points compared to the year average) and are interested in trying new products (+17 percentage points) – this rare double-digit shift is encouraging,” said Leathwood.
“The path forward is about rebuilding price trust and simplifying value for consumers. There is room for growth for brands in the second half of 2025, by delivering the right product, at the right time, at the right price.”
Food and beverage categories are delivering more consistent growth, with food items generating eight times the level of absolute growth over two years compared to non-food. Beverages are the clear standout with robust growth across the board.
Other trends identified include an increasing focus on health, with Aussies adding more fresh food to their baskets and 46 per cent of shoppers actively seeking no and reduced sugar options.
Growth is also evident in category specialists (i.e. retailers focused on personal care, home care or pet care), who have accelerated the importance of value, with customers seeking out these brands due to their strong value reputation.
Brands have experienced significant change already; this is set to continue however, there is clear potential for brands to grow – but only by responding with agility, precision and consumer-centric innovation.
CommBank insights
Commonwealth Bank’s HSI Index was up 0.3 per cent in June, following gains of 0.4 per cent in April and May. Taking the whole of June quarter together, the HSI lifted by 1.4 per cent, just a little above the 1.2 per cent recorded in the March quarter, but still below the 1.6 per cent recorded in the December quarter of 2024.
CBA senior economist, Belinda Allen, said household spending is starting to show signs of consistency month-on-month and should continue to pick up this year as consumers begin to loosen their purse strings.
“This recovery is taking longer than expected to occur, but there are green shoots emerging. The annual growth rate has picked up, but the recovery is not yet assured. Spending around sales events and new items show consumers are still deliberate on their spending decisions,” said Allen.
“At the same time there remains a clear preference to save and pay down debt. Recent data from CBA showed that just 10 per cent of eligible home loan customers chose to reduce their mortgage direct debit payments following the May interest rate cut.
“This follows a similar trend after the February rate cut when around 10 per cent of eligible customers had adjusted repayments at the same point in time – eventually rising to 14 percent before the May RBA decision.”
It was expected that the Reserve Bank of Australia (RBA) would lower interest rates again at the beginning of July, but made the unexpected decision to hold rates at 3.85 per cent. Allen said CBA expected the RBA to cut the cash rate in August by 25 basis points, with November the most likely option for a follow up rate cut.
“While we still anticipate a pickup in household spending in 2025, a slower rate cutting cycle could soften this recovery over the remainder of the year,” said Allen.
In June, homeowners without a mortgage saw the weakest yearly spending growth per capita at 3.5 per cent, continuing the trend from May. Homeowners with a mortgage saw a shift higher in spending in June, with gains over the past year now tracking at 5.2 per cent. Meanwhile renters saw a lift to 4.2 per cent.
“Homeowners with a mortgage have reduced spending on transport, hospitality, and food and beverage goods over the past year but lower interest rates are expected to boost disposable income in the coming months. Renters continue to spend more following an increase in April and May,” said Allen.
New South Wales recorded the strongest household spending growth in June of the states and territories, rising 0.7 per cent. Over the past year, the state has outperformed nationally, up 8.4 per cent in a change at the top of the state leaderboard.
Meanwhile Queensland has grown 7.3 per cent, recovering well from ex-tropical cyclone Alfred in March, when the state posted the softest growth of all states at just 0.2 per cent.
