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      Australia's retail sector remains under pressure

      KPMG’s Retail Health Index (RHI) fell further to -1.07 in the June quarter 2026, remaining firmly in negative territory as higher business costs and fragile consumer confidence intensified pressure across the sector.

      Earlier energy shocks flowed through to transport and input costs, while cost-of-living pressures, interest rates and global uncertainty kept households cautious. EOFY promotions supported spending, but consumers remained highly focused on value and discounts.

      Looking ahead, retail conditions are expected to remain challenging until the end of 2027. Any recovery is likely to be gradual and vulnerable to renewed global disruption.

      Download KPMG Retail Health Index  – September 2026

      A data driven quarterly perspective on the future health of Australia’s retail sector.

      Download report (1.2MB)

      Retail Health Index September 2026

      Insights on the future health of Australia's retail sector.
      Download report

      Current state of the retail sector

      Australia’s retail sector weakened further in the June quarter 2026, with the Retail Health Index falling to -1.07 from -0.39 in the previous quarter. Rising producer costs and a sharp deterioration in consumer confidence were the main drivers.

      Household spending increased by 1.3% in nominal terms, supported by discretionary spending and EOFY sales. However, spending volumes rose by a softer 0.7%, showing that demand remained subdued once price increases were taken into account.

      Retail turnover improved in both current and inflation-adjusted terms, as consumers delayed purchases until discounts were available. Consumer confidence also improved modestly in August, but remained firmly in pessimistic territory.

      Retail profitability weakened, while insolvencies remained elevated. At the same time, retail property returns and online spending continued to grow, highlighting an uneven operating environment across the sector.

      What factors are affecting the retail market?

      • Consumer confidence

        Confidence deteriorated sharply in the June quarter. Sentiment improved modestly in August as fuel price and rate concerns eased, but households remain cautious.

      • Household spending

        Nominal spending strengthened, driven by discretionary categories and EOFY sales. Growth in spending volumes was softer, indicating that higher prices accounted for part of the increase.

      • Business costs

        Producer prices accelerated as earlier energy and transport shocks flowed through the economy. Wage growth remained steady, offering limited relief.

      • Global trade and supply chains

        Supply chain pressures have eased from their April peak, but freight capacity constraints, elevated transport costs and geopolitical uncertainty continue to affect planning.

      • Retail performance and insolvencies

        Retail profits fell in the June quarter and insolvencies remained above their historical average, showing continued pressure on margins and business resilience.

      • Digital retail and value

        Online spending continued to grow, while average basket sizes fell. Consumers are comparing prices, waiting for promotions and switching retailers for better value.

      Why KPMG

      The KPMG Retail Health Index (RHI) measures the revenue and cost pressures facing retail and consumer businesses in Australia. It also considers future conditions by including consumer confidence.

      Contact us to discuss how KPMG can help your business navigate current challenges and prepare for changes across the industry.

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