In the chart pack we discuss our view of the retail downturn, noting that it will be gradual because income growth is strong. We also analysed past retail cycles to provide a guide to the potential duration and magnitude of this downturn. We found that on average, past non-food retail cycles have unfolded over 18 months from peak to trough, and another 11 months to return to mid-cycle growth. The key risks to our retail forecasts are housing and price inflation. A greater than 10% fall in house prices would create a negative wealth effect for retail in 2027. On the other hand, price inflation likely to rise in food retail in 2027 masking some of the weakness in retail volumes.

Despite the range of risks facing the retail sales outlook, there has been a level of consumer resilience that persists. We refresh our retail forecasts in this report, with a shift in the shape pushing more of the downturn into 2027. We forecast FY27e retail sales growth of 4.3% (prev 3.7%) and FY28e growth of 3.9% (prev 4.0%). The recent resilience in sales comes from the strength in income, not irrational factors like more credit. Retail cycles take longer to unfold than many expect. We have explored past cycles to help inform this pending downturn. A trough in retail usually occurs 18 months from the peak, which would date this cycle’s trough around May-June 2027. The outlook does have risk with a sharper drop in wealth our primary concern. The potential for higher retail price inflation is an upside risk to nominal sales growth.

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 link provides a presentation associated with a webinar we held. The recording is embedded in the presentation and details our revised forecasts for retail in the year head. 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.

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.

Given the increased uncertainty for consumers, we have put together a slide deck to help navigate the potential risks to retail demand over the next 12 months. Separately we have published reports about both the risk from higher petrol prices and what history tells us about the impact of interest rate hikes on retail spending.

The link provides a presentation associated with a webinar we held. The webinar addressed our retail sales forecasts for 2026. We addressed the outlook for the Australian retail sector in 2026 and beyond. The sector had a strong finish to 2025 but the outlook is more hazy with risks to both sales momentum and gross margins emerging. 

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.

The link provides a presentation associated with a webinar we held. The webinar addressed our retail sales forecasts for FY26. We addressed the crucial time for retailers that is the festive season and how trends may shift across retail categories. While the macro-economic backdrop is conducive, what will it take to see stronger sales growth?