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As soon as petrol prices started to rise in response to the Middle East conflict, many Australians – already grappling with high living costs – changed their spending habits.

Beyond cutting back on driving, households are slicing deeper into their budgets, with some even forgoing healthcare.

Here are four shifts in consumer behaviour, as observed by businesses across the country.

Cheap drinks

There has been a years-long trend in Australia of drinking less, but better quality, alcohol. 

That has started to change as consumers search for cheap drinks.

The ASX-listed alcohol packaging company Orora has detected a global shift toward cheaper spirits since the start of the Iran war. The volume of sales is also less than they had previously forecast due to diminishing customer confidence.

Steven Fanner, executive director at Spirits & Cocktails Australia, says Australians are “trading down” due to rising living costs.

“They are getting something that’s a little bit cheaper, or opting for lower alcohol content, not necessarily as a responsibility measure, but more because of cost,” Fanner says.

The consumer trend is making it difficult for businesses that would ordinarily increase their prices to offset rising costs such as freight and fuel.

“The question for businesses is how do you contain the price of products for the consumer because they don’t have any more money to spend, even if the cost of producing the product and getting it to market is going up,” Fanner says.

Similar pressures are being felt by cafes and restaurants grappling with rising costs and financially strained customers, many of whom are cutting back on takeaway coffees and eating out.

Healthcare bypass

The ASX was trading near record highs shortly before investors lost confidence that there was a clean exit strategy for the US-Israel war on Iran that could normalise the oil trade. 

While many stocks have weathered the subsequent bout of market weakness, the Australian headquartered medical device company Cochlear lost more than 40% of its market value in a single trading session on Wednesday.

The company downgraded its profit outlook after global demand for its cochlear implants, designed to help people with hearing loss, weakened amid deteriorating consumer sentiment.

It told shareholders that poor sentiment “appears to be affecting discretionary healthcare decisions”, as more prospective patients are unable to afford treatment, especially in the US.

Analysts at Morningstar said Cochlear was facing long-term headwinds with adults “deprioritising implants”.

Bedding anxiety

The deterioration in consumer confidence has been rapid, with many households already paying more on their mortgages before rising petrol prices took hold in March.

The closely watched Westpac-Melbourne Institute consumer sentiment index shows anxiety over jobs has reached levels not seen since the pandemic.

Households have responded by forgoing purchases of furniture, bedding and home appliances.

Over the past two months, shares in furniture retailer Nick Scali have fallen about 20%, Harvey Norman is down more than 25% and homeware stockist Adairs has dropped by more than 30%.

Richard Hemming, editor at Under The Radar Report, says retail is “at the forefront of your discretionary dollar”.

“People don’t like war, it’s a confidence killer,” Hemming says.

“You’ve got a lot of headwinds at the moment. The environment is one of consumer constraint, and retail is at the front of that.”

There are some brighter spots in retail, with Scentre Group reporting strong foot traffic at its Westfield centres, suggesting Australians are still enjoying shopping outings.

Consumed by worry

As the Middle East conflict enters its third month, the cost of the oil crisis is starting to ripple across the Australian and global economy, affecting the prices of a surprising array of products.

The world’s top condom producer, Malaysia’s Karex, plans to raise prices by up to 30% if supply chain disruptions drag on, while several Australian building suppliers have announced price rises of a similar magnitude for PVC pipes.

Soaring fuel, fertiliser and transport costs will also feed through to higher prices in supermarkets.

Spending data from Zip shows there has been an increased use of its buy now, pay later platform over the past three months for essential items including utilities, insurance, education and health.

While Australia’s jobs market is still robust, the sheer speed of the deteriorating global situation, and concern over prolonged disruptions to energy supplies, has people worried.

This contrasts with the upbeat outlook evident less than a year ago, when inflation seemed to be under control and interest rates were falling.

Kirsty Robson, a senior financial counsellor from Consumer Action law centre, says more people are calling the national debt helpline due to anxiety about their future, when traditionally they would only seek help after suffering a financial event such as a job loss.

“Mortgages are now the top presenting issue,” Robson says.

“People have very future-focused anxiety because they are unsure how they will afford to pay for things.

“They are panicking, and perhaps rightly so, about how they’re going to manage in a couple of months’ time because they are reaching their financial capacity now.”