Australians slashing holiday budgets by 20% amidst cost-of-living crisis

Only five out of 10 retailers anticipate sales growth this year.

Australians are expected to cut their holiday spending by nearly 20% this season due to the ongoing cost-of-living crisis, forcing retailers to adapt and offer more value as they anticipate a better 2025. 

According to Deloitte’s 13th annual Retail Holiday Report, which surveyed 1,000 consumers, retailers are bracing for challenges, with only 51% expecting sales growth, down from 57% in 2023 and 67% in 2022. 

Additionally, 40% of retailers believe consumers won’t pay full price, whilst 41% foresee an improvement in consumer confidence over the next year, up from 10% in 2023. 

Consumers, on the other hand, are planning to cut back significantly. About 76% are reducing overall spending, though 67% still plan to make small splurges. 

“The last 12 months have brought little joy for our retailers, as inflation, interest rate rises and weak demand have weighed on economic growth,” said Deloitte Consumer Products & Retail Sector Leader Elise Sharpley.

“Cost of living pressures and the associated belt tightening are driving consumer spending intentions and actions, and this is set to continue into the 2024 holiday retail season,” she added.

She noted that average spending is expected to fall to $1,002, an 18.9% decrease from 2023.

“As they usually do, many consumers are still looking to splurge here and there, but they’re also telling us they expect to buy fewer products and services,” added Damien Cork, a parner at Deloitte Retail, Wholesale and Distribution.

He said retailers are responding by lowering prices, focusing on value-driven products, and enhancing in-store experiences. Flash sales events like Click Frenzy, Black Friday, and Cyber Monday will be crucial, but traditional December sales will still be key.

Looking ahead to 2025, Sharpley notes that whilst challenges remain, with over 40% of retailers expecting improved consumer confidence and more than half predicting sales growth, there are signs of potential recovery.