Australia’s retail sector weakened further in the June quarter, with challenging conditions expected to persist until the end of 2027, according to KPMG’s latest Retail Health Index (RHI).
The RHI fell to -1.07 in the June quarter of 2026, down from -0.39 in the previous quarter, as rising business costs and weaker consumer confidence placed further pressure on the sector.
KPMG said producer costs accelerated during the quarter as earlier energy shocks flowed through to transport and other input costs. At the same time, cost-of-living pressures, interest rates and global uncertainty continued to weigh on household confidence.
Household spending increased 1.3% in nominal terms during the quarter, supported by discretionary spending and end-of-financial-year sales. However, spending volumes rose by a more modest 0.7%, indicating higher prices accounted for some of the increase.
EOFY promotions also helped retail turnover, with consumers increasingly delaying purchases until discounts became available. This focus on value was also evident online, where spending continued to grow while average basket sizes declined.
Conditions remained difficult for retailers themselves, with profitability weakening during the June quarter and insolvencies remaining above historical averages.
Consumer confidence improved modestly in August as concerns around fuel prices and interest rates eased, although sentiment remained in pessimistic territory.
Looking ahead, KPMG expects challenging retail conditions to persist until the end of 2027, with any recovery likely to be gradual and susceptible to further disruption from global economic and geopolitical developments.
