Businesses across Australia have observed notable shifts in consumer behavior since the onset of the Middle East conflict, as households adapt to rising costs and economic uncertainty. Beyond reducing driving, many are making deeper cuts to their budgets, including forgoing healthcare. Here are four key trends identified by businesses.
1. Shift Toward Cheaper Alcohol
A long-standing trend of drinking less but higher-quality alcohol is reversing as consumers seek more affordable options. ASX-listed packaging company Orora reports a global move toward cheaper spirits since the conflict began, with sales volumes falling short of forecasts due to weakening customer confidence. Steven Fanner of Spirits & Cocktails Australia notes that Australians are "trading down" to cheaper or lower-alcohol beverages, driven by rising living costs rather than health consciousness. This trend challenges businesses that typically raise prices to offset higher freight and fuel expenses. Fanner explains, "The question is how to contain product prices when consumers have no extra money, even as production and transport costs rise." Cafes and restaurants face similar pressures, with customers cutting back on takeaway coffees and dining out.
2. Healthcare Deferred
The ASX neared record highs before investor confidence waned due to uncertainty over the US-Israel war on Iran and its impact on oil trade. Medical device company Cochlear lost over 40% of its market value in a single day after downgrading profit forecasts, citing weakened global demand for cochlear implants. The company stated that poor consumer sentiment is affecting discretionary healthcare decisions, especially in the US, where patients struggle to afford treatment. Morningstar analysts warn of long-term headwinds as adults "deprioritise implants."
3. Home Goods Sales Slump
Consumer confidence has plummeted rapidly, with many households already stretched by higher mortgage payments before petrol prices surged in March. The Westpac-Melbourne Institute index shows job anxiety at pandemic-era levels. In response, households are postponing purchases of furniture, bedding, and appliances. Shares in furniture retailer Nick Scali have fallen 20%, Harvey Norman is down over 25%, and homeware stockist Adairs has dropped more than 30%. Richard Hemming of Under The Radar Report says retail is at the forefront of discretionary spending cuts: "People don't like war; it's a confidence killer." However, Scentre Group reports strong foot traffic at Westfield centres, indicating Australians still enjoy shopping outings.
4. Rising Anxiety and Essential Spending
As the conflict enters its third month, the oil crisis impacts a wide range of products. Malaysia's Karex, the world's top condom producer, plans to raise prices by up to 30% if supply disruptions continue. Australian building suppliers have announced similar increases for PVC pipes. Soaring fuel, fertiliser, and transport costs will also drive supermarket prices higher. Zip's spending data shows increased use of its buy now, pay later platform for essentials like utilities, insurance, education, and health. Despite a robust jobs market, the rapid deterioration of the global situation and concerns over energy supply disruptions have heightened public worry. This contrasts with the optimistic outlook less than a year ago, when inflation seemed controlled and interest rates were falling. Kirsty Robson of Consumer Action Law Centre reports that more people are calling the national debt helpline due to future-focused anxiety, with mortgages now the top issue. "People are panicking about how they'll manage in a few months as they reach their financial capacity," she says.
