A thought to challenge conventional wisdom about price inflation in retail. Perhaps inflation is now within a sweet spot where retailers have price rises to address rising costs, but inflation is not high enough to crimp demand. On our analysis, more than half the outsized sales growth in retail over the past three years was a function of price inflation. In other words, less than half of the sales growth was heightened demand (volume). See the chart below. Inflation is portrayed as evil. Yet deflation is an even bigger headache for retailers. As it stands, retail inflation is between 0%-5% depending on category. This is lower than the general level of inflation in Australia. We expect more price rises over the next six months, which may contribute to better retail sales growth than some expect even as interest rates rise and broader living cost pressures hurt households.