The link provides a presentation associated with a webinar we held. The recording is embedded in the email and details our revised forecasts for retail in the year head. We addressed the impact of higher interest rates, lower house prices and retail price inflation. All these factors will shape the timing and shape of a retail sales slowdown in FY27e. The presentation deck is now live on the website. 

The Australian retail sector is just commencing its slowdown, which will result in slower sales in FY27e. We forecast retail sales growth of 3.7% for FY27e, down from 5.0% achieved in FY26e. The slowdown is more dramatic in non-food retail and dining out. Both had above average growth in FY26e and will suffer weaker volumes as income growth slows and both house prices and housing churn weigh on retail sales. The weakness should become evident in the December 2026 quarter where households will see the lowest rate of income growth. Other factors that will impact retail include the inflation backdrop which will step-up more so in food categories. House price changes and the resulting wealth effect will also be a key swing factor over the next 12 months.

The RBNZ remains on hold while the RBA has already raised rates three times this year. New Zealand retail sales began recovering in the September quarter 2025 and the income backdrop remains good for NZ consumers despite the risk of higher inflation and interest rates. We forecast New Zealand retail sales growth to hold at 4.2% over FY27e, with 3.6% growth in at-home food & liquor and 4.6% in non-food retail. The retail sales cycle in New Zealand may be more uncertain in FY27e, but the long-dated impact of rate cuts is still a tailwind, along with improving net migration and employment growth. Key retailers that have earnings upside in NZ are Ampol, Woolworths and Harvey Norman. To a lesser extent, JB Hi-Fi and Nick Scali will see upside to earnings but both have a very small store network.

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.

In our view, the Australian retail sales cycle just passed its peak in the December 2025 quarter at 6% growth. We forecast retail sales growth of 4.5% in 2026. While a moderation from the recent peak, without further house price growth, households will be less willing to use their savings to drive retail spending. Our forecast of 4.5% growth is just below long-term trends. While interest rate movements will be topical, unless there are multiple rises, the shift in the Australian dollar and house prices will be more impactful on retail spending than any rate rise itself.

We have made modest revisions to our retail sales forecasts. For FY26e, we forecast retail sales growth of 4.0% (prev 3.9%) and for FY27e 4.1% growth (unchanged). Non-food retail spending has been solid in the past six months and the trends are likely to continue into Christmas this year. However, we may see some shift in category performance in the new year as household goods slow, while fashion and takeaway food sales improve. Our upswing in retail sales is muted, which is a function of slowing household income growth and a low savings rates. We continue to monitor house prices closely as a source of upside risk if the wealth effect stimulates the use of previously stored-up savings.

Australian retail sales growth has been on an improvement path since March 2024. Retail sales growth for FY25 was 3.3%, better than the 1.8% in FY24. We see retail spending accelerating further to 3.9% in FY26e. Why not a stronger improvement given interest rate cuts? Given tax cuts and strong wages growth during FY25, income growth will actually slow in FY26e making it hard to see much acceleration in retail sales. If retail growth is stronger than our forecast in FY26e, it is likely driven by households dipping into savings if house prices rise substantially.

Australian retail sales growth finished 2024 better than where it started, and the good news is we are likely to see a stronger growth rate for 2025. We forecast 3.6% retail sales growth this year, up from 2.6% in 2024. We see a stronger recovery in non-food retail, particularly household goods. While a good year, much of the support to spending comes from tax cuts and rate cuts, making it hard to see further gains beyond June 2026. Moreover, geopolitical risks (both positive and negative) feel larger this year. Both retailers and investors should have contingency plans.

The link provides a presentation associated with a webinar we held. The webinar addressed our updated outlook for retail sales and the drivers of a recovery in retail spending. In the presentation, we answer the question of whether consumers will spend or save their income growth, quantifying the impact of rate cuts and tax cuts, which retail categories we expect to outperform in FY25e, and a comparison of Australia with offshore markets.

We have updated our retail sales forecasts, which are modestly higher in FY25e and slightly lower in FY26e. We forecast FY25e retail sales growth of 3.2% (prev 2.9%) and the largest driver of our revisions is stronger non-food online sales growth. A retail recovery is underway, because this year has unquestionably strong household income growth, which sets a solid base for retail spending. However, households have a low savings rate, which detracts from the upswing. We expect a more notable pick up in household goods and online with softer sales in dining out for FY25e.