Australians cut Christmas spending as cost pressures rise

Pureprofile has released research showing Australian consumers are approaching Christmas with greater caution and financial stress, with cost-of-living pressures shaping festive spending plans.

The survey of 1,015 Australians aged 18 to 64 found 62% were experiencing a moderate to high cost-of-living impact. Overall, 79% said they were adjusting their spending, 35% planned to spend less on gifts and 30% expected to choose cheaper food and drink options.

Among those under the most pressure, the pullback was more pronounced. In that group, 90% expected to change their spending, 44% said they would spend less on gifts and 34% planned to trade down on festive food and drink.

The data also suggests inflation is reshaping Christmas budgets. Australians expected to spend an average of AUD $518 on food and drink, up AUD $12 from the previous year, compared with AUD $487 on gifts, down from AUD $491. It marks the first decline in planned gift spending since 2023.

To make room for those costs, consumers were most likely to cut back on decorations, eating out and experiences. Decorations topped the list at 70%, followed by eating out at 65% and experiences at 58%.

Broader sentiment was subdued. Fewer than a quarter of respondents, 24%, said they thought the economy was strong, down from 29% a year earlier. A third, 33%, said they had had a good or fantastic year, down from 36%.

Martin Filz, Chief Executive Officer of Pureprofile, said consumers were placing more weight on price and certainty as they headed into the holiday period.

"Brands and retailers that enter 2027 seeking to meet people where they are will be tapping into the dominant mood over the vital Christmas retail period. Given the ongoing cost-of-living crisis facing many Australians, this means offering comfort, reassurance and affordable options," Filz said.

Black Friday pressure

The research points to Black Friday as both a budgeting tool and a source of strain. More than half of Australians, 58%, said they planned to use sales events to help cover Christmas spending, rising to 76% among families with children aged up to 12.

At the same time, 47% of Black Friday shoppers said they often spent more than planned. That share rose to 58% for young families and 51% for both Gen Z and Millennial shoppers.

Pressure linked to the sales period appears to be increasing. Among respondents, 44% said Black Friday promotions created pressure to spend money they had not intended to spend, up from 34% a year earlier, while 37% described the sales period as too overwhelming, up from 29%.

"As Black Friday becomes the major sales event of the year, Australians are increasingly experiencing both choice fatigue and the fear of missing out. Retailers can win trust by showing they understand the pressure shoppers are under and helping them stay in control. Clear and honest discounts, easy comparisons, price-match promises and flexible returns are keys to seeing carts fulfilled," Filz said.

Changing channels

The findings also show differences in how age groups discover deals and shop for gifts. Among Gen Z respondents, 21% said they were buying more products directly from social media platforms such as TikTok, Instagram and Facebook than a year earlier.

Yet younger shoppers were not moving entirely online. The survey found 65% of Gen Z preferred shopping for gifts in store rather than online, compared with 50% of Millennials.

Older consumers were more likely to respond to direct retailer communications. Gen X and Baby Boomers were roughly twice as likely as Gen Z to respond to retailer emails and newsletters, while traditional media remained most relevant for Baby Boomers.

Filz said younger shoppers were using stores differently from previous generations.

"With a desire for experiential environments, 'third spaces' to hang with friends, and tactile product evaluation, Gen Z are redefining what in-store shopping means and turning it into a cultural moment. Mecca, Kmart and Glassons are key examples of retailers catering to Gen Z, and retailers should take note of these elements to streamline and entice in-store visits, as it no longer suffices to merely have products on display," Filz said.

AI and priorities

The research also found that one in five Australians may use AI tools to help find deals. That figure was higher among younger groups, with 26% of Millennials and 26% of Gen Z saying they planned to use AI for Christmas plans and gift ideas. Among likely users, the main uses were comparing prices or finding deals, generating gift ideas and seeking product recommendations while shopping online.

Gift preferences reflected the more practical tone of the season. The most popular items people hoped to receive were gift cards, clothes or shoes, money, and food and drink. More people also planned to give homemade presents, with 15% saying they would do so, up from 11% a year earlier, although only 17% said they hoped to receive one.

Looking beyond Christmas, Australians were focused on financial stability and personal wellbeing. Saving more money was the top priority for 2027 at 53%, followed by improving health and fitness at 39% and spending time with family at 37%, while travel and career advancement ranked lower.