Since we last published our retail forecasts in January 2026, a lot has changed. Higher petrol prices and interest rates will lead to slower retail growth. We forecast retail sales growth of 4.0% for 2026, which is a revision down from 4.5% previously. On the surface it looks like a mild revision. However, the slowdown for non-food retail and dining out is larger at a one percentage point. Discretionary spending growth could slow by 3% by December 2026. The offsets to a more negative stance are higher inflation in food categories, unemployment remains low and households have savings buffers to deal with the pressures. There is a bear case where spending turns negative, but that requires recessionary conditions and an unsympathetic RBA and government.

We have updated our forecasts for Ampol and Viva given the refining margin outlook. While the outlook is still fluid, it will clearly be a strong year for both companies in FY26e. We assume a refining margin of US$18/bbl for Ampol and US$19/bbl for Viva in FY26e. For Ampol, higher margins will translate to FY26e group EBITDA of $1,817 million (EBIT of $1,299 million) and for Viva we forecast EBITDA of $1,124 million. In our view, the benefits of elevated margins will have dissipated by the end of FY26e and as a result, the revision to our medium-term earnings is much smaller.

Oil price shocks are relatively rare but they do lead to a spike in fuel prices. In Issue 10 of Price Watch, we explore the duration of fuel price spikes and their impact on both consumer demand and costs across the retail value chain. The impact of a 30-cent increase in fuel prices could drop retail sales growth by 0.8% with the most substantial impact in the first five months following the spike. The most notable impact is on takeaway food, fashion and hardware sales. The impact on retailers and consumers is broader than just the fuel price impact because product transport costs, energy costs and product packaging are also impacted by oil price movements.