The Square Local Economy Report

That shift we made towards living, working and socialising outside the CBD started in 2020 and has consolidated every year since. But if 2025 was the year Australia became a Neighbourhood Nation, what does that mean for 2026? What will local economies look like moving forward? And how can Australia’s local businesses capitalise on this change in the way we live within our cities? 

That’s where the Square 2026 Local Economy Report comes in. Square analysed anonymised transaction data in capital cities throughout Australia, revealing how money circulates within a local economy. Then, we surveyed nearly 1000 Australians about how they shop and spend locally, and what they want to see from their local businesses. 

By pairing real-world spending patterns with consumer sentiment, this report outlines:

• The importance of regulars and the network effect within a local economy 
• The keys to earning – and retaining – local loyalty 
• How businesses can reach and serve locals in 2026 and beyond 

The key message for businesses that emerges from these findings is clear: if you look after your locals this year, your locals will look after you.

Regulars are crucial to the financial success of all local businesses.

• Strongest effect in Darwin: Over a year, a regular is worth an estimated 6.36x more value than a transient customer.
• More loyalty up north: Brisbane and the Gold Coast boasted more annual regular value relative to transients than their southern counterparts Adelaide, Hobart and Perth.  
• In Australia’s two largest cities – Sydney and Melbourne – regulars constituted just over 4x more annual value than transients, suggesting a link between more populated cities and less regular-reliant local economies.

Below is an anonymised seller network illustrating neighbourhood business connectivity through regulars in one of inner-Melbourne’s most tightly knit suburbs. Each node represents a business in the given postcode, and there is a line between them if they share at least one regular (i.e., a person who returned at least four times in 2025). The bigger the node, the more connections a business has.

These connections form a neighbourhood network where one business’ growth supports the next through a shared loyal customer base. In North Melbourne, home to some of the city’s best cafés and restaurants, there’s a clear concentration of shared regulars between food and drink sellers. But these locals also have plenty of other interests in common, too – particularly in retail. 

This dovetails with Square’s consumer survey findings. Whenever someone goes to a business in their neighbourhood, it’s common for them to visit another one: at least 84% of shoppers periodically make several shopping stops on the one trip.⁶ 

In Melbourne overall, 74% of shared regulars were between two food and drink sellers. Sydney was similar, with 72% of shared regulars between food and drink sellers.⁷ If hospo operators want more regulars, they should seek out good neighbours.

Repeat customers have always been essential for business, but in Australia, data shows that the impact of regulars on the balance sheet has become increasingly pronounced. 

Community from crisis 

Across Australia, 2021 saw a substantial jump in the share of regular revenue. 

During times of crisis, in a time of lockdowns and staying home, the local economy sustained. And regulars were more important than ever. But this wasn’t just a flash in the pan. Several years after the pandemic, it appears this even greater emphasis on regulars was long-lasting and could become permanent. In 2025, the national share of revenue contributed by regulars grew, while that of transient customers dropped. 

Takeaway: if you’re opening a business in the suburbs, your strategy needs to take a local-first approach.

Big things come from small – but frequent – transactions

Across Australia last year, the data was clear. Transient customers tend to spend more per transaction than regulars in every major Australian city. In some cities such as Sydney, transient customer average spend was nearly double that of regulars.⁹ 

But regulars were still five times more valuable over the course of a year.¹⁰ Because those little transactions add up. Over days, weeks, and months, these consistently returning customers contribute more than the big one-off spend from someone who’s not coming back. 

That data was borne out by consumer sentiment, too. Of the Australians we surveyed, 91% of locals who become regulars at a business either spend the same, or more, than before.¹² 

Takeaway: Regulars can contribute higher average spends, but their true value comes from repeated custom. Focus on upping the frequency of visitation, not the spend. 

There’s a demonstrable appetite for neighbourhood hospitality – 48% of surveyed Australian consumers spend at restaurants, dine-in or takeaway, at least once a week. There’s an even higher reliance on retail: 63% spend at a retailer in their postcode each week.¹³

Beauty businesses like salons, spas and hairdressers, given their more infrequent nature, aren’t being visited weekly too often. But there’s still a palpable preference for local ones as opposed to ones farther from home – 81% spent on beauty within their suburb at least once last year.¹⁴

Consumer desire to spend locally, and to become a local regular, is there. 35% of Australian consumers feel an important – and even “essential” – connection with their favourite local business within their postcode.¹⁶ 

That desire can be harnessed by providing locals what they need and want to see in their community. 

In the next section, we’ll outline exactly what consumers are looking for right now – and how businesses can give it to them.

Cost-of-living pressures can be overcome

Everyone’s been feeling the pinch recently. Business margins are slim and consumers’ hard-won disposable income is not easily given over. For spending in the local economy, convenience and community-mindedness are less of a priority than cost right now. Yet quality is still a very important consideration for 72% of locals.¹⁷ 

That extends beyond hospitality and retail – affordability is the dominant priority for consumers for all local spending.

Spending in the Neighbourhood Nation has moved to the suburbs 

As established in 2025’s Neighbourhood Nation report, Australian CBDs’ visitation decline coincides with a commensurate increase in suburban transaction volume. Average spends in suburban Sydney and Melbourne in 2025 were higher than CBD spends by $1.65 and $1.62 AUD respectively.¹⁹

That retreat from our city-centres has been a boon for local operators. 

Seventy-five percent of Australian consumers spent at least a quarter of their retail and hospitality budget, each month, in their neighbourhoods. Beauty purchases at businesses such as salons, or general services like mechanics tell the same story: most consumers in 2025 spent the same amount in their neighbourhood as they did in 2024, across every category.²² Some, despite cost-of-living pressures, even spent more on these discretionary goods and services. It’s clear that this move towards suburban spending is more than a pandemic-influenced trend. It’s here to stay. Later on, we’ll be looking at how consumers are planning on spending locally in 2026. 

Businesses need to keep convenience top of mind

Convenience has always been the backbone of the local economy: early morning milk runs, last-minute appointments after work, pizzas on takeaway night. That’s what the neighbourhood’s all about. 

But with everything – especially time – coming at a higher premium now, convenience is more important than ever. And though wide product ranges and opening hours are well liked by consumers, there’s one kind of convenience that clearly reigns supreme: location. 

It cuts both ways, too. When asked about the main impact local businesses have on neighbourhoods, the responses were emphatic: 60% of consumers said they made the suburb a more convenient place. 

Today’s cost-of-living pressures make affordability a higher priority than ever. With that said, the financial pain is being unevenly distributed, and Square data indicates more pain for the CBD than the suburbs. 

We’re now spending more of our time – and budgets – than ever in the neighbourhood. And where a business chooses to be within that neighbourhood matters. So for local operators, convenience is still king. 

It’s the vibe of the thing

Housing affordability and availability in Australia have played an important role in the transformation of the country’s suburbs – and its local economies. Population is on the rise, and so is higher-density living. 

This is compelling people to spend more time outside the home, within the neighbourhood. This rise in demand for “Third Places” to visit outside of work and home could explain the growing importance of atmosphere in people’s estimation of a local business.

In a fast-paced, transient environment like the CBD, businesses can perhaps get away with de-prioritising their atmospheres. But in the neighbourhood, people want somewhere to linger. 

A great atmosphere comes from more than just décor and a good playlist. 57% said staff knowledge of products and services was a major priority for them, while 48% said a memorable experience comes from feeling a personal connection with staff and community.²⁴

One of the best investments a local business can make is in developing a strong culture of warm service and deep knowledge in its staff. That will make your business somewhere locals will want to keep coming back to – and stay for a long time once they get there. 

Another way is through digital enhancements – such as smoother payment, pick-up and booking – that make the customer experience even better. 

Consumers’ preference of digital tools here is illustrative. They want tech that actually enhances the in-person experience of visiting somewhere in the neighbourhood: easier ordering, smoother payments and reservations, and intuitive discounts that incentivise repeat visits. 

Locals love loyalty

Affordability, convenience, and atmosphere are the pillars of a successful business in the local economy. And though they may be obvious to identify, they’re much harder to implement. In many ways, they’re a throwback to the fundamentals of bricks-and-mortar trade. 

Another classic making a comeback in Aussie neighbourhoods is the good old-fashioned loyalty program – redesigned for modern times. 

Loyalty tools, which reward repeated custom and can offer an array of discounts and deals, were the highest-growing Square marketing feature in Melbourne and Sydney in 2025. This is consonant with consumers’ growing prioritisation of affordability and convenience. 

According to consumers, 36% say that having a loyalty program or app would make them more likely to frequent a local business.²⁷ In local economies right now, it pays to be – and reward – a loyal customer.

The best – and worst – ways to reach customers right now 

Most locals want to hear from the businesses in their postcode. But there’s a right way and a wrong way to do it. 

In 2026, email remains consumers’ favourite way to be communicated with by local businesses, with 41% indicating it as their top preference. Social media was split – 29% said they liked to engage with content, but just 24% said they wanted to receive direct messages through social media. Just over a quarter – 27% ­– indicated a desire to be reached through text messages.²⁸ For some, it’s a more direct and immediate way to receive information. For others, it’s an intrusion. 

Taken together, these findings suggest that right now consumers prefer to engage with local businesses on their own terms – checking their inbox and social media accounts – rather than being reached out to directly.

Now that we’ve outlined what locals want, and how to tell them about it, the final section outlines how consumers plan on spending in the local economy in 2026. And what the financial forecast in our local economies looks like for the future.

Many consumers are feeling bullish about their spending habits this year – though some businesses in the local economy stand to gain more than others. 

The 2026 spending forecast

Despite today’s strong financial headwinds, there’s cause for optimism in the local economy, with consumers expecting their discretionary neighbourhood spending to hold steady this year. 

And Square transaction data suggests that consumers won’t just be spending the same amount – they’ll lean towards buying the same things, too. Across every capital city, and the Gold Coast, a regular at a beauty business typically purchased the same item 74% of the time. In hospitality, within those same cities, a regular customer orders the same thing 60% of the time.

And Square transaction data suggests that consumers won’t just be spending the same amount – they’ll lean towards buying the same things, too. Across every capital city, and the Gold Coast, a regular at a beauty business typically purchased the same item 74% of the time. In hospitality, within those same cities, a regular customer orders the same thing 60% of the time.³⁰

Takeaway: 2026 should be a year of consolidation, rather than innovation, when it comes to the line-up of goods and services your business is offering the local economy. 

Furthermore, consumers have also indicated an openness – or at the very least, a tolerance – for price increases by local businesses: 63% of respondents say they’d be “somewhat” to “very” likely to continue shopping at local businesses who raise their prices. But only if these prices were raised to offer increased value, like with better service or quality enhancements.³¹

Locals aren’t naïve about the high cost of doing business in Australia. Or about inflationary pressures driving up prices. No-one loves paying more for anything, but if a local business has earned its customers loyalty, then there is an understanding for increasing prices – within reason. A note on the counter blaming a new price on the rising cost of coffee beans or alternative milks might not cut it. But the amount of your price increase needs to seem reasonable and “pass the pub test.” And it needs to be communicated clearly and honestly.

Where consumers are most – and least – likely to shop in 2026

When consumers need to reduce overall spending, some local businesses will inevitably be more affected than others. If the broader economy takes a turn for the worse – like another surprise Reserve Bank interest rate rise – Australia’s local economies will take a hit too. And people will spend less. These are the neighbourhood businesses that will be most, and least, affected, by a downturn in local spending.

Most affected businesses32	Least affected businesses
Breweries and bars (28%)	Health care professionals  (6%)
Full-service restaurants (25%)	Retail shops (12%)
Spas / wellness services (23%)	Quick-service restaurants (18%)

These findings suggest that businesses with more premium pricing or that are easily competed with are the most susceptible to fluctuations in consumer spending. The things that make full service restaurants so great – beautiful design, attentive service – also make them pricier. And therefore more vulnerable than their more affordable quick service counterparts.

Breweries and bars, which compete with cheaper bottle shops and domestic consumption, face similar challenges. On the retail and service side of the local economy, specialist retailers or businesses with highly specific equipment or high-skilled professionals, such as beauty services or dentists, are more insulated.

On the hospitality end, it’s a story about affordability and competing with at-home consumption. If the economy’s experiencing turbulence, then bars, breweries and full-service restaurants have to find ways to lower prices or provide more value to locals. 

Just 19% of consumers surveyed expect to shop and dine more in 2026 than they did last year; under a fifth of locals. However, with 63% intending to spend the same amount, there’s considerable cause for optimism.³⁴ Particularly for businesses who are already operating successfully.

It’s a shame more consumers aren’t seeking to spend greater amounts in their suburb this year, but it aligns with reality. And it means that if your local business was working in 2025, there’s a good chance it will continue to work well in 2026 and beyond.