Jun 24, 2019

Economic indicators cause for some concern Down Under

Though its economy has been stable for a decade, Australia's lower-than-expected growth in 2018 have led to a cautious 2019-2020 forecast.

Melbourne (Shutterstock)
Melbourne (Shutterstock)


Having one of the world’s most stable economies with ever-growing GDP, Australia remains one of the few markets that has managed to avoid a recession for more than a decade. That being said, even this market has issues that are impacting consumers’ purchasing sentiment.

According to the Australian Bureau of Statistics, Australia’s GDP grew 2.3% in 2018 compared to the previous year. This growth was lower than predicted, which reflects a drop in household spending and a dwelling investment downturn. Experts are being cautious in forecasting for 2019-2020. It would appear that both internal risks (coming from a real estate crisis and high levels of household debt) and external risks (such as the trade dispute between China and the US) have mirrored the national currency decline of 2018 which has been reflected on the state of the economy.

According to the Demand Institute, the average disposable income per capita decreased by 10% compared to 2017, despite an increase in job numbers. As wages did not increase proportionally, it’s no surprise that the state of the economy, alongside healthcare, was rated as the number one concern for Australians. A 6 points decrease of Consumer Confidence Index in the beginning of 2019 has led to Australia joining other pessimistic Asia Pacific markets including Singapore, Taiwan and Japan.

At the same time, the FMCG market has remained stable with 1% volume growth in 2018 (versus 0.6% in 2017) and 1.7% (0.7% in 2017) value growth. Value growth was driven, in part, by the growing share of more premium categories in consumers’ baskets such as meat, seafood and other fresh food. The flipside to this is that 38% of Australians claim to spend less on dining out when compared to five years ago

The online channel presents one of the biggest opportunities for the Australian grocery sector. Australia is one of the top 5 countries in Asia Pacific where online fresh grocery is growing. One-in-five people bought fresh food online in 2018 (+5 points vs 2017).

Although the growth in the e-commerce sector (increased by 35% in 2018) is impressive, it is important that retailers continue to evolve their online offer and service to grow consumers’ trust in this sector—especially when it comes to purchasing fresh food. Ensuring consumers receive the same quality of product, while enjoying the benefits of convenient delivery is the key to driving continued growth in online.  

Growth in the premium and health and wellness products is another opportunity in the Australian grocery market. Australian consumers are willing to pay more for products that are environmentally friendly and sustainable (62%), contain organic or all-natural ingredients (59%), or products that carry social responsibility claims (55%).

At the other end of the price spectrum, we see that ‘value’ brands also have the opportunity to drive growth in Australia. More than three-in-ten (31%) Australian consumers say they are not willing to pay more than average on any product. Retailers have embraced this trend by investing in their Private Label offer to make these house brands more appealing to shoppers who are seeking value.

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