We have produced a chart pack about the outlook for the liquor industry. The primary debate is the structural vs cyclical components impacting the decline in consumption. While we see structural decline, we expect it to be in the order of -0.5% per capita, per annum, far lower than the circa -6% p.a in the past two years.  We are seeing signs of improving volumes in on-premise (pubs and restaurants).

The Australian national accounts for the June 2025 quarter explain the strength in retail sales over the same time period. In the quarter, household income rose 7.6% and the seasonally adjusted savings rate dropped by one percentage point. Broader consumer spending rose 4.8% in the June quarter and retail spending rose 4.2%, the strongest rate of growth in two years. Can the retail sales momentum continue? With income growth likely to slow in FY26e, a further drop in savings will be needed to support retail spending. We expect retail spending to rise 3.9% in FY26e, ahead of FY25 at 3.3% growth.

The Australian consumer has exited lockdowns in a strong financial position. In the December 2021 quarter, household income grew 5%, which is better than long-term trends and the savings rate was 14% of income. We estimate households have $200 billion in excess savings to fund holidays and a return to normal spending patterns. This bodes well for a soft landing in retail sales for 2022.