AUSTRALIA | Australian households are facing a renewed financial squeeze after the Reserve Bank of Australia (RBA) raised interest rates by 0.25 percent pp to 4.1 percent, while petrol prices continue to climb in response to global energy shocks.
Oil market disruption linked to escalating tensions in the Middle East has already pushed petrol prices well above AUD two per litre in many areas of Australia, increasing weekly fuel costs for households and adding to inflation pressures.
If borrowing costs rise again in May as predicted, this combination could further tighten disposable income for many Australians. For CPG and grocery markets, these pressures tend to translate quickly into changes in everyday shopping behaviour.
“When borrowing costs and everyday expenses such as fuel rise at the same time, shoppers tend to become far more deliberate about how they spend. We were already seeing ongoing restraint in spending intentions before January’s rate rise, said Alistair Leathwood, Head of Media Analytics and Insights, Circana.
In these moments, we typically see stronger promotion hunting, more switching between retailers and adjustments to basket size as households look for ways to manage their budgets.
Value-seeking shoppers drive private label growth
Australian consumers are extremely value-conscious. As a result, brand loyalty becomes less entrenched, and shoppers are increasingly willing to switch between brands and retailers if it means getting better value for money.
Circana grocery data from a recent global study ending December 2025 showed that annual sales of private label products in Australia have reached AUD 49 billion, accounting for almost 40 percent of grocery unit sales and 36 percent of CPG value share. Private label sales grew by 6.8 per cent year-on-year from 2024 to 2025.
These figures highlight how pressure on household budgets is intensifying the need for brands to promote and discount, as approaching two-thirds of Australian shoppers view retailer own brands as a credible alternative.
Circana’s data already suggested that value-seeking behaviour has become more prominent across the FMCG sector, with 42 percent of Australian grocery sales sold on promotion in 2025 and 57 percent of consumers choosing where to shop for groceries based on who has the best deals that week, as these consumers search for better deals.
If consumer interest rates rise again in May, the coming months may see Australian CPG markets continue to be shaped by a balancing act between cost pressures and consumers’ growing focus on value, promotions and affordability.
Rising costs push consumers back towards eating at home
Higher energy prices can also ripple through the supply chain, raising logistics and manufacturing costs. Over time, this can put additional pressure on retail prices, reinforcing the cautious spending patterns already evident across many household budgets.
These pressures can also influence how often consumers eat or drink outside the home. During periods of tighter household budgets, consumers tend to reduce discretionary spending on restaurants, bars and other out-of-home occasions.
In periods of economic uncertainty, consumers rarely stop spending on essentials, but they do become more selective. That often means trading down within categories, purchasing larger value packs or shifting more consumption to at-home occasions.
For example, Circana’s CREST data, which tracks consumer restaurant spending and visit behaviour, shows foodservice spend rose 6.3 percent in Q4 2025, helped by improving consumer conditions.
However, with economic pressures returning, including potentially higher consumer borrowing costs, growth in restaurant and bar visits is likely to slow as households reassess how often they eat out.
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