Facing relentless financial pressures, a generation of younger Australians is pioneering a novel approach to consumption, fuelling demand for so-called 'little luxuries' while navigating a persistent cost-of-living crisis.
The New Calculus of Consumption
Industry analysts report that, unlike previous generations who typically cut out non-essential spending during tough economic times, today's under-30s are adopting a more selective and strategic method. Grant Davidson, a consumer brand specialist at the agency Principals, describes this cohort as embracing "selective curated products." They willingly buy generic versions of items they deem unimportant, thereby freeing up cash to splurge on premium products and experiences that matter to them.
"On the items they see as important, they will indulge," Davidson states. He attributes this behaviour to their status as the first true digital natives, who are "incredibly savvy at finding workarounds and discounts."
This trend is partly driven by the prolonged nature of current inflation and sky-high housing costs, which differ from short-term economic shocks of the past. For many, it represents a way to maintain some enjoyment without completely forgoing the indulgences that young adults have historically enjoyed.
Retailers Adapt to the 'Mini' and 'Pre-loved' Trend
Retailers are quickly capitalising on this shift. In the alcohol sector, more wine labels now offer half-bottles. Australian Vintage went further, releasing a 187ml format – essentially a single glass – that resembles a test tube. Similarly, boutique beer makers are enticing younger drinkers with "squat" 250ml cans, which are two-thirds the size of a standard can. These smaller servings also align with the fact that younger consumers tend to drink less than previous generations did at the same age.
The fashion industry is seeing a parallel movement. Subscription services like Nuuly allow customers to rent their wardrobes, while platforms such as Depop have popularised the circular economy of buying and selling secondhand clothes. Davidson highlights a crucial mindset shift: the "shop to sell" approach. A young person buying a $300 jacket may believe they can resell it later for $200, effectively viewing the net cost as only $100.
Experiences Over Products and the Debt Dilemma
For many, spending is increasingly directed towards experiences. Kayshini Logeswaran, a 28-year-old business analyst from Sydney, says she has cut back on impulse purchases but is happy to pay for trips and events. "I’m more inclined to spend my money on experiences than actual products," she explains, noting that experiences create lasting memories. Research from consulting firm McKinsey confirms that younger consumers are more willing than their predecessors to spend on enriching experiences.
Other defining traits of Generation Z include a strong focus on sustainability and ethical business practices, with many open to paying a premium to support responsible brands.
However, this spending during a financial crunch carries significant risk. Data from the credit reporting company Experian shows younger Australians are increasingly turning to personal loans for debt consolidation, and arrears are rising. The default risk profile for young credit card holders has worsened over the past three years, even after inflation peaked.
Barrett Hasseldine, head of data science at Experian, warns that evidence suggests young consumers are using credit to manage tight budgets or are overspending as prices rise. "In either case, these are warning signs of potential problems," he says.
An 'Escape from Reality'
Researchers point to an element of financial defeatism underpinning some of this behaviour. With home ownership seeming increasingly unattainable, some young consumers reason they may as well enjoy smaller luxuries now. Hande Akman, research director at YouthInsight, describes these "little luxuries" as "an escape from reality" for a generation coming of age during ultra-high living costs.
"They worry about the cost-of-living crisis, but they are not so worried that they stop buying luxury items," Akman observes, calling this the most interesting age group she has studied in 30 years. They demand discounts but also want to know what's on trend, embodying a complex and resilient new consumer psychology.
