Australians & Kiwis face strain from living cost crisis

A recent report from NIQ has highlighted ongoing financial strain for Australians and New Zealanders due to the cost of living crisis, particularly with rising food and utility costs.

The "Consumer Mid-Year Review: Guide to 2025" report by NIQ shows that Australians and New Zealanders are still facing financial challenges, with nearly half feeling worse off than a year ago. In Australia, 48% of respondents felt they were in a poorer financial position than a year prior, though this has decreased from 52%. In New Zealand, the figure was 52% feeling worse off compared to three years ago.

Main concerns for consumers in both countries continue to centre around high living costs, with Australians particularly worried about food prices while New Zealanders are more concerned about utility costs. When assessing the broader financial impact of recent years, over half of the populations in both countries identified themselves as cautious spenders despite not feeling directly impacted financially.

The report also noted a rise in the number of individuals who classify themselves as "Strugglers", increasing to 19% from 17% among Australians and from 12% to 24% among New Zealanders since mid-2023. As a result, consumers are reducing expenditure on non-essential items such as clothing and dining out while increasing their spending on essentials like utilities, rent, and groceries.

Spending data shows a shift towards buying fresh produce with a forecasted increase of 11.4% for Australians and 8.4% for New Zealanders concerning fresh groceries. Conversely, spending on snacks and confectionery is expected to decline by 37.2% and 40%, respectively.

Despite the general reduction in social outings, about 41% of Australians aged 18 to 34 reported that they frequent bars and restaurants more than usual, while 24% maintained their usual habits and 35% reduced such activities.

NIQ projects a positive economic outlook for 2025, with easing inflation and steady global growth. Australia's GDP is expected to grow by 1.5% in 2024 and 2.2% in 2025, while New Zealand could see growth rates of 0.8% in 2024 and 1.9% in 2025, as per the OECD Economic Outlook. Although inflation has decreased, it remains above pre-pandemic averages of around 2% annually.

Marco Silva, Director, Customer Success at NIQ, advises that retailers and brands prepare for continued consumer caution but also recognise areas for growth. "We all know that consumers have been through a lot of difficulties over the last five years," he said. "Half of ANZ consumers still feel in a worse financial position due to a higher cost of living, and there is a higher proportion of struggling consumers in both countries compared to years ago."

Silva further commented on current market changes, stating, "Decelerated inflation, combined with immigration, has helped fast-moving consumer goods to grow volume again after a few years, driven by higher prices driving value growth. To manage their budgets, consumers are looking into buying on promo and private label, as well as shopping at alternative retailers to search for better deals."

"Brands cannot ignore this and need to ensure they are mapping how they are executing and how present they are at alternative retailers, as this is the piece of the market that is growing the fastest," Silva added.

NIQ's report also highlights other emerging trends set to shape consumer behaviour in 2025, such as increased immigration affecting demographics and preferences, a potential shift towards healthier food choices influenced by the rise of GLP-1 drugs for diabetes, and the continued growth of online shopping avenues like Retail Media Networks and Social Commerce.