Australians are less satisfied with life today than during COVID lockdowns, new KPMG data shows.
There is a number in this week’s KPMG analysis of ABS data that deserves to stop every small business owner in their tracks. Australian life satisfaction now sits lower than it did during the COVID-19 lockdowns of 2020.
Overall life satisfaction, measured on a scale of one to ten, has fallen to 7.1 in 2025. During the pandemic in 2020, when businesses were shut and people were confined to their homes, it was 7.2. Before the pandemic in 2019, it was 7.5. Between 2014 and 2019 it held relatively stable at between 7.5 and 7.6. It has been sliding since.
Terry Rawnsley, KPMG Urban Economist, makes clear what is driving it. “Unlike the pandemic lockdowns this isn’t a temporary disruption, it’s sustained pressure on living standards,” he said. “Real wages have gone backwards, declining 4.1 per cent between 2019 and 2025, while median household wealth has stalled at $700,000.”
“These factors have left many average Australians in a precarious financial position for the better part of five years and is undoubtedly affecting how they feel about their lives,” Rawnsley said. The financial stress indicators underneath the headline figure tell the fuller story.
One in five households, 21.7 per cent, now report being unable to raise $2,000 within a week. That is up from 19.5 per cent in 2019, and the highest figure recorded in the ABS data series going back to 2014. More than a quarter of households have had at least one cash flow problem in the past year, up from 21.8 per cent in 2019. More than a quarter have drawn down savings or increased debt in the past year. These are not edge cases. They describe a significant and growing share of the Australian population. Many of them are your customers.
“Improving life satisfaction is not something that can be fixed overnight,” Rawnsley said. “It will require a sustained focus on factors closely shaping how Australians experience the economy, including real incomes, housing affordability and financial resilience.”
The customers feeling it hardest
The fall in life satisfaction is not evenly spread, and the generational breakdown matters directly for SME owners thinking about who walks through their door.
Australians aged 25 to 34 recorded the lowest life satisfaction of any age group at 6.8, down from 7.5 in 2019. That is the largest fall of any cohort in the entire dataset.
“The decline in life satisfaction among 25 to 34-year-olds reflects the reality of Australia’s housing market,” Rawnsley said. “This is a group facing high rents or large mortgages at the same time as real incomes have gone backwards.”
This age group is a core customer demographic for hospitality, retail, fitness, entertainment, personal services, and professional services across Australia. They are also, right now, the most financially pressured generation in the data. Australians aged 45 to 54 are also under significant strain, recording life satisfaction of 6.9. Rawnsley describes them as the sandwich generation. “The sandwich generation are starting to feel significant financial pressures caring for both ageing parents and trying to support their children whose ability to generate their own wealth has flatlined,” he said.
Single parent households are particularly exposed. “Almost half of single parent households report cash flow problems and 45 per cent of those reporting four or more cash flow problems,” Rawnsley said.
At the other end of the spectrum, Australians aged 65 and over have held steady at 7.7, unchanged from 2019. Lower exposure to labour market pressures, higher home ownership rates, and the cushioning effects of superannuation and government pensions have insulated this group more than others.
For SME owners, the implication is clear. The customers most likely to be pulling back, trading down, or delaying purchases right now are in their prime spending years.
How squeezed customers behave
When households are under sustained financial pressure, their behaviour changes in ways that show up directly in small business trading. Financially stressed customers make different decisions than financially secure ones. They compare prices more carefully. They cut what feels optional before they cut what feels essential. They delay rather than cancel, and then sometimes cancel anyway. They scrutinise value in ways they did not when money felt easier.
The squeeze also changes how customers think about loyalty. A customer who felt financially comfortable two years ago and stayed with a preferred business out of habit may now be actively looking at alternatives. Loyalty built on convenience rather than genuine value is the first thing to erode when budgets tighten.
Businesses in discretionary categories feel this most immediately. But even businesses in more essential categories are seeing customers scrutinise value more carefully than before. The businesses most exposed are those whose customers can genuinely choose to spend less, delay, or go elsewhere. Understanding where your business sits on that spectrum is the starting point for responding effectively.
What SMEs can do now
The consumer squeeze is real and, as the KPMG data makes clear, it is not resolving quickly. Rawnsley’s own assessment leaves little room for optimism about a near-term reversal. “It will require a sustained focus on factors closely shaping how Australians experience the economy,” he said.
For SME owners heading into a new financial year with compliance costs, Payday Super changes, and a consumer base under more pressure than at any point since before the pandemic, the question is not whether customers are squeezed but how to serve them well in that environment.
Know which parts of your revenue are discretionary from your customer’s perspective, not yours. A business owner often sees their product or service as essential. The customer under financial pressure may see it differently. Closing that gap, either by genuinely becoming more essential or by communicating value more clearly, is one of the most important things an SME can do right now. Track your trading patterns weekly rather than monthly. Soft patches in customer behaviour show up in weekly data long before they appear in monthly summaries. Earlier visibility means more time to respond.
Think carefully about how you talk to customers who are under financial pressure. The businesses that retain customer loyalty through tough periods tend to be those that demonstrate genuine understanding of their customers’ situation. That is not a marketing message. It is a customer relationship built over time by showing up consistently and making every transaction feel worth it.
The sustained pressure on Australian households will not resolve on its own schedule. For SME owners, the advantage goes to those who see it clearly, plan for it honestly, and stay close to what their customers actually need right now.
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