KPMG Retail Health Index

Setback in retail recovery

The latest KPMG Retail Health Index (RHI) indicates a setback in the retail sector’s recovery, mainly due to elevated cost pressures and stagnant retail turnover. However, our latest forecast continues to suggest that the medium-term outlook for the sector remains positive. Easing inflation, lower interest rates, rising household consumption, and a resilient labour market will continue to support the health of the retail sector.

Current state of the retail sector

Labour market

The job vacancy rate in retail trade declined by 0.3 percentage points, while the all-industries rate fell by 0.1 percentage points. Despite this, the retail sector remains tighter than the broader labour market, with its vacancy rate running below the all-industry average for the fifth consecutive quarter.
Consumer spending

More and more Australians are choosing to shop online. However, households are staying savvy, looking for deals and keeping their budgets tight, resulting in more activity but lower average spending per household.
Retail turnover

Retail turnover in current dollars rose 0.7% this quarter, a clear moderation from the 1.3% and 1.1% gains recorded in the final two quarters of 2024. The softer outcome appears to reflect a normalisation in discretionary spending patterns after a period of strong promotional activity in late 2024.

What factors are affecting the retail market?

Supply chain conditions

While supply chain conditions were initially stable, retail businesses are now dealing with increased complexity from changing trade regulations, potentially leading to higher retail inflation in the coming quarters.

Environmental factors

The higher frequency monthly retail turnover was broadly stable in March 2025, rising by 0.3% m/m in seasonally adjusted terms. The increase was largely driven by food-related categories, particularly in Queensland, where households brought forward purchases of essential goods in anticipation of supply disruptions associated with Cyclone Alfred.

Household spending caution

Households are struggling to maintain the spending momentum observed in previous quarters, as they continue to be cautious with their spending. Retail volumes barely grew in the March quarter of 2025 and retail spending per capita encountered a minor dip following two consecutive quarters of growth.

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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.