Australian Consumer Confidence Index: too early to be optimistic?

Confidence stabilizes amid economic slowdown, retail optimism holds steady. Aden Advisory's May 2025 Consumer Confidence Index presents a comprehensive portrait of evolving sentiment across Australia. Following a sharp rise in confidence during early Q1, recent data suggest a leveling off in optimism, particularly amidst growing cost-of-living pressures and macroeconomic uncertainties.

Australia’s GDP growth has slowed to 1.3% year-on-year, and inflation continues to weigh heavily on the cost of essential goods. Amid this environment, public expectations about future financial stability remain mixed. While 42% of respondents believe the country is on the right economic path—a slight dip of 3 percentage points from April—the picture becomes more complex when dissected by age, income, and geography.
 

Spending patterns reflect this divergence. Discretionary spending remains surprisingly resilient in specific sectors. Fashion and apparel purchases continue to thrive, particularly among Gen Z consumers, who show little hesitation in maintaining lifestyle-related spending. In urban centers like Sydney and Melbourne, dining and entertainment spending has grown by 12%, reflecting continued post-pandemic social momentum. In contrast, spending on essential goods has slowed, with 68% of lower-income households prioritizing cost-cutting measures.

Geographical differences are becoming more pronounced. Victoria and New South Wales continue to demonstrate higher confidence levels, supported by relatively robust job markets and service-sector recovery. Meanwhile, Queensland and Western Australia lag behind, where housing stress and regional industry slowdowns are eroding household optimism.
 

Looking at personal financial expectations, 37% of Australians anticipate an improvement over the next six months. Optimism is strongest among younger adults aged 18–34, with 54% expecting better outcomes. Older Australians, particularly Baby Boomers, remain cautious—citing interest rate volatility and concerns over asset value stability.
 

Trust in institutions is also playing a critical role in shaping sentiment. Trust in the Reserve Bank of Australia has climbed 8%, buoyed by recent interest rate policy adjustments that have brought a degree of stability. Conversely, trust in federal economic leadership has fallen by 5%, most notably among small business owners who continue to face uneven policy support.
 

For brands and retailers, understanding this evolving consumer psychology is more essential than ever. Price sensitivity is on the rise: 62% of consumers say they now compare prices more frequently than a year ago. Brand loyalty is becoming increasingly conditional—48% of respondents say they’re willing to switch brands for better deals or more sustainable offerings. Retailers providing flexible payment models, such as Buy Now, Pay Later options, are seeing higher retention rates, particularly among Gen Z consumers.
 

“While sentiment has softened slightly, Australian consumers remain resilient,” said Elena Moore, Lead Economist at Aden Advisory. “Brands that empathize with current financial realities and deliver meaningful value will continue to perform well.”
 

As we look to the months ahead, rising household debt will continue to test consumer resilience. Yet, sectors such as travel, technology, and wellness may experience growth as consumers shift toward 'conscious optimism'—selectively investing in experiences and personal improvement despite broader caution.
 

Key Findings from the May 2025 Index:

• 42% believe Australia is on the right economic path (–3 pts from April)

• 37% expect their personal finances to improve in the next 6 months

• Sentiment is highest among Gen Z and metro-area residents

• Price-conscious behavior is accelerating across all demographics
   

The months ahead may not be easy—but for businesses that listen and adapt, there is opportunity in understanding what Australians are truly feeling, and what they need next.