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      Retail's medium-term outlook is improving

      KPMG’s Retail Health Index (RHI) remains in negative territory in the latest reading for the March quarter 2026, reflecting continued pressure across the sector.

      Consumer confidence has weakened, driven by higher interest rates, rising fuel costs and ongoing global uncertainty. This is limiting the pace of improvement in retail conditions. At the same time, some cost pressures have begun to ease, though overall conditions remain volatile.

      Looking ahead, retail conditions are expected to improve gradually; however, the path is likely to be uneven, with a sustained recovery not expected before late 2027.

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      Retail Health Index: June 2026

      insights on the future health of Austarlia's retail sector
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      Current state of the retail sector

      Australia’s retail sector remains under pressure, with the Retail Health Index staying in negative territory in the March quarter 2026. While conditions improved slightly, the overall environment remains subdued. Household spending growth slowed to 1.0% over the quarter. Retail turnover increased modestly by 0.7% in current prices but declined when adjusted for inflation, highlighting weakness in underlying demand.

      Spending patterns are shifting, with households prioritising essential categories and pulling back on discretionary goods, particularly larger or deferrable purchases.

      Retail insolvencies moderated from late 2025 highs but remain indicative of ongoing pressure across the sector. At the same time, profitability continues to be constrained by a combination of softer demand and elevated costs.

      What factors are affecting the retail market?

      • Consumer sentiment

        Confidence has weakened in early 2026, driving more deliberate and selective spending behaviour. This continues to weigh on short-term retail momentum.

      • Household spending

        Spending growth is moderating, with a clear shift toward essentials. While per capita spending remains soft, population growth continues to support total demand.

      • Cost pressures

        Input and labour costs are beginning to stabilise, easing some pressure on margins. However, this may prove temporary given ongoing global volatility.

      • Global trade and supply chains

        Geopolitical tensions and trade uncertainty are increasing operational complexity. This is driving higher costs and reinforcing cautious planning across the sector.

      • Retail performance and insolvencies

        Retail conditions remain mixed. Lower insolvencies point to reduced immediate stress, though profitability continues to reflect a challenging trading environment.

      Why KPMG

      The KPMG Retail Health Index (RHI) is based on a calculation that seeks to incorporate the revenue and cost drivers of a retail and consumer-focused business operating in the Australian economy, with an element of future expectations through incorporating a measure of consumer confidence. 

      If KPMG can help your business in any way navigate the current business environment and plan for any future developments that are facing the industry, then please contact us. 

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      Retail

      KPMG’s Retail group offers audit, tax and advisory services geared to the unique needs of the retailing industry.
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