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.

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.

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.