Australian consumers seek value as RBA holds rates steady

The Reserve Bank of Australia has decided to maintain current interest rates, with insights from research firm Circana indicating that Australian consumers continue to prioritise value amidst economic uncertainty.

Paul Hinds, Managing Director APAC at Circana, commented on the decision and its impact on consumer sentiment. Hinds said, "Although today's RBA decision will be disheartening for Australians, we know from recent polling data that regardless of the decision, shoppers are still choosing to remain frugal due to the high level of uncertainty."

He noted that this mood of caution is heavily influenced by broader international factors. "Fuelling this uncertainty are global tariffs and a changing geopolitical climate, leaving consumer confidence fragile," Hinds added.

This uncertainty presents challenges for retailers, who are being forced to make difficult and sometimes contradictory decisions. Hinds explained, "For retailers, the road ahead is complex with contradictory and opposing realities requiring them to expand and cut simultaneously to meet changing shopper needs."

"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."

Recent data from Circana analysing food and grocery retail trends for the first half of 2025 highlights an increasingly value-driven Australian consumer. According to the company, 82% of shoppers are "promo loading"—stocking up on items when they are on promotion—while 81% are actively seeking discounts and special offers. Two in five Australians now rank lowest prices as "extremely important for where I shop."

These behaviours are taking place in a retail landscape described by Circana as marked by contradiction, complexity and cautious optimism. The pressures underpinning behavioural change are persistent, with cost-of-living concerns and fragile confidence stemming from both local economic policy and global events. The company notes that while shoppers are reducing the frequency of their store visits, the average number of items per basket has increased, offsetting the marginal decline in transactions and softening price growth.

Anticipated rate cuts and existing tax reductions have contributed to a modest sense of optimism that income growth may strengthen within six months, which could support retail sales and potentially improve consumer confidence.

Alistair Leathwood, Head of Media Analytics and Insights at Circana, elaborated on the current consumer mindset: "Shoppers are exercising greater discretion with their spending, prioritising essentials and pulling back on non-essential goods such as alcohol."

Leathwood also pointed to a noteworthy shift in attitudes towards quality and new products. "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.

"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," said Leathwood.

Circana reports that food and beverage items have remained resilient, generating eight times the absolute growth of non-food items over two years. Beverages, in particular, have shown marked gains, outpacing other categories in consistent growth.

Health considerations also continue to shape consumer choices, with a growing preference for fresh food and nearly half of shoppers—46%—actively seeking products with no or reduced sugar content.

The performance of category specialists, such as retailers focused on personal care, home care or pet care, has also improved. Customers are increasingly choosing these stores for their strong association with delivering value.

Circana suggests that brands will need to remain agile and responsive if they are to capture available opportunities. The company notes there has already been "significant change", and that this is likely to remain a fixture of the market environment.