This is a chart pack from our webinar presentation following our April 2025 updated retail forecasts. The chart pack addresses the retail sales outlook, household income growth and savings. We also address the topical issues of US tariffs, the Australian dollar and wage rate growth. The presentation pack has a link to the webinar recording.

We have updated our forecasts for the Australian retail sales outlook. Despite significant global uncertainties created by US tariffs, Australian consumers have taken it in their stride. We forecast retail sales growth for 2025 of 3.4% (prev 3.6%). Our downgrade in growth is only for supermarkets and liquor with softer volumes and price inflation. Non-food retail has started the year strongly, particularly in household goods and online. The strength in retail sales is largely attributable to strong household income growth and the drivers of this elevated growth will be difficult to sustain given the magnitude of recent tax cuts and outsized population growth. A better backdrop would require consumers to save even less. We expect sales growth of 4% beyond 2025.

The link provides a presentation associated with a webinar we held. The webinar addressed our retail sales forecasts for 2025. In the presentation, we answered some of the big questions on everyone’s minds, the impact of interest rate cuts, how elections impact spending and the outlook for retail sales across categories.

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.

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.

Australian retail has had a challenging 12 months. We expect we are past the worst for this sales cycle with a gradual improvement in growth over the next 12 months. We forecast retail sales growth of 2.9% in FY25e, up from 1.8% in FY24e. The sectors likely to see the strongest recovery are household goods, supermarkets and online. Some categories are still vulnerable to a correction in volumes such as liquor, cafes & restaurants and fashion. While there is an upswing, it will be mild and leave growth rates below trend for the next three years in our view given the low household savings rate and decelerating population growth.

We have updated our retail sales outlook, with modestly higher forecasts for 2024. We forecast 2.7% growth (up from 2.5% previously). We have lifted our non-food forecasts, but lowered food & liquor forecasts. The prevailing sales trends are very soft but should improve in the back-half of calendar 2024 as income tax cuts flow through. We only see a modest pick up because lower retail price inflation will constrain overall sales growth in FY25e.

Australian retail has had a difficult 2023 with below trend sales growth of 3.1%. We expect another challenging year with growth of 2.5% for 2024. While a weaker year, it will be a tale of two halves with softer growth in the January-June period and better growth for July-December. Moreover, we expect slowing sales in at-home food & liquor and a sharper slowdown in cafes, restaurants and takeaway food. We expect an improving rate of growth for non-food retail. While tax cuts will help sales later in 2024, lower retail price inflation, higher unemployment and a shift of spend to travel will all limit the upside in industry sales growth.

We have updated our retail sales forecasts, which are modestly higher over the next two years. We forecast FY24e retail sales growth of 1.7% (previously 1.5%). We estimate FY25e retail sales will rise 3.1% (previously 2.5%). We expect the worst of the deceleration in sales will be over by December 2023. The normalisation of volumes after excess growth during COVID-19 has played out. Households have handled the steepest period of interest rate increases by dipping into excess savings. Housing indicators are starting to improve and we have tax cuts on the horizon to support a mild recovery in sales growth for FY25e.

Australian retailers have begun to experience a slowdown in retail spending and it’s going to get tougher over the next 4-6 months. We expect FY24e retail industry sales to rise 1.5%, a slowdown from 9.0% growth in FY23e. While this may sound gloomy, a glass half full perspective is overall sales may not slow any further from the trends as at June 2023. The glass half-empty view is that we may not return towards trend sales growth until 2025. The willingness of households to tap into excess savings shapes our view that the downturn will be shallow. We also note that food inflation will prop up that sector until early 2024. The path of price inflation is likely to have a greater bearing on sales outcomes more so than retail volumes, which are already in decline.