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.

Australian retail sales rose 6.2% in October 2025 year-on-year, a surprise given our feedback of modest spending in October in what felt like anticipation of Black Friday deals. The theme of a strong consumer continued from the National Accounts update for the September quarter in which household income was revised higher. Higher house prices and improved savings rates are buffering the consumer with sentiment trending higher.

Australian retail sales rose 4.7% in September 2025 year-on-year, an improvement on August 2025 trends. Growth was stronger across all retail categories. While the RBA has paused on further rate cuts, house price growth looks to be accelerating, which is supportive of better retail sales growth. It should be a decent Christmas for most retailers, just watch for the levels of discounting.

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 only rose 3.1% in August 2025, a slowdown from the 5% trendline seen in the previous three months. The slowdown was broad-based, albeit café & restaurant spending remained strong at 6.4% growth. While the slowdown may raise some concern, we see the sustainable trend level around 4% growth and hence a softer month for August and September is likely. Consumers are bound to wait till Black Friday to spend up again.

The latest household spending indicator (replaces Retail Sales series) showed retail sales growth of 4.8% for July 2025, up from 3.8% in June 2025. The strongest growth was in “other” retailing, which includes online pure-play, pharmacy and recreational goods. Department stores had a surprisingly strong result and household goods was solid too. We expect growth rates to hover close to 4% over the remainder of 2025.

Australian retail sales finished fiscal 2025 with 4.6% growth for June 2025, the strongest growth in over two years. The standouts were online, recreational goods, pharmacy, cosmetics and electronics. Liquor, cafes & restaurants and supermarkets were all laggards. The strong finish to the year partly reflects end of financial year sales. Retail spending for FY25e was up 3.3% and we see 3.9% growth for FY26e.

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 rose 4.1% in May 2025 year-on-year. This is an acceleration on the combined March-April growth of 3.6%. Foot traffic data for May reported growth of 8%. Pharmacy, beauty, recreational goods and online were strongest in May. Weaker categories were liquor, cafes & restaurants and furniture, albeit all were positive in the period.

Australian retail sales rose 4.0% in April 2025 year-on-year. The March-April period has been distorted by the shift of timing of Easter over the past two years. Therefore, the combined March-April results are more relevant and show retail sales growth of 3.6%. The strongest areas are online, pharmacy, beauty and recreational goods. The weakest areas remain liquor, cafes & restaurants and department stores.