Deloitte Access Economics Retail Forecasts

9 SEPTEMBER 2025: Retailers are enjoying their strongest economic outlook in years, buoyed by rising consumer confidence, falling interest rates and growing real wages. Yet the recovery remains slow, with years of lost purchasing power still weighing on households.

Releasing the latest edition of Deloitte Access Economics’ Retail Forecasts, Deloitte Access Economics partner and principal report author, David Rumbens, said: “Retailers are finally seeing some more substantial economic tailwinds, but the long-awaited retail recovery is still taking its time.

“The extended cost-of-living crisis has created a hangover in more cautious consumer behaviour – real wages are nearly 6% below their peak and consumer prices increased by almost a quarter in the five years to June 2025.

“However, moderating inflation, real wage growth and lower interest rates are already boosting consumer confidence. Most signs are pointing in the right direction, and we’re on our way to a stronger retail environment.”

Last week’s National Accounts reported that real consumer spending increased by 0.9% in the June quarter, the strongest quarterly growth since 2022. It lifted annual growth in real consumer spending to 2.0%, the strongest annual growth rate for two years.

Many households took advantage of the close proximity of Easter and ANZAC Day during the quarter to take time off and get away. As a result, money that may otherwise have been spent on retail was focused elsewhere, with real household spending on the purchase of vehicles growing 2.4%, recreation and culture growing 2.0% and transport services growing 1.7% in the June quarter.

Rumbens continued: “Real growth in retail spending is up 1.5% on this time last year. That’s the best result for nearly three years, but real sales are still only just keeping pace with population growth. The current 1.5% real growth compares to a pre-COVID decade average of 2.4%.”

“What this means is that the lift in overall consumer spending hasn’t fully reached retailers yet, but there are clear signs that households’ capacity to spend is improving.

“A more supportive retail environment is anticipated after a few more consistent real wage growth results in households feeling better off.

“There will however be variance in the recovery. Continuing a longer-term trend, the June quarter highlighted the retail sector’s two-paced growth. Non-food sales volumes grew by 0.8% over the quarter, taking annual growth to 3.5%. On the other hand, food sales volumes declined by 0.2%, with annual growth limping along at ‑0.1%.”

Rumbens concluded: “Unfortunately for grocers, Australians are sticking to a more frugal approach to shopping. Through the cost-of-living crisis households had to adapt and find cheaper meals and ingredients. Many see little reason to go back.

“Overall, retail sales are expected to pick up over the second half of this year as consumers feel better off and end of year sales support elevated spending.”

This is anticipated to be a taste of things to come as a longer period of real income gains is locked in. Retail sales volumes are expected to grow by 2.3% in the 2026 calendar year before accelerating to 2.6% in 2027.

National real retail turnover (year-to)

Source: ABS Retail Trade; Deloitte Access Economics

Retail Forecasts is produced quarterly and provides analysis of current retail spending and the economic drivers that influence this. It includes ten year forecasts of retail sales by major category and of key economic drivers.

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