The debate about the minimum wage decision for FY27e is heating up and the backdrop of rising inflation is adding risk for retailers. We expect a retail award wage increase of 3.8% to 4.3% for FY27e, with a backdrop of the trimmed mean inflation at 3.7%-3.8%. The retailers with highest sensitivity to wage cost growth are Myer, Woolworths, Bapcor and Accent Group. All retailers have adapted to higher wage rate growth over the past three years by automating elements of their business and cutting hours. Further wage savings is likely to be limited to those retailers with larger formats and flexible labour, which includes Bunnings, JB Hi-Fi and Officeworks.