Chart of the Week: Brighter days ahead for consumers and retailers
Morningstar analysts are optimistic about the near-term outlook for the retail sector.
This week’s chart comes from Morningstar analysts’ Australian Retailing Q2 2025 outlook.
Our analysts believe that there are brighter days ahead for consumers and retailers, as shoppers are ‘not just surviving, they’re thriving’.
The report concludes that the near-term outlook for the greater retailing sector is increasingly positive.

Household incomes are growing in real terms after a period of rampant inflation. With inflation back within the Reserve Bank of Australia’s target range, the focus is shifting to keeping the job market in good shape.
Monetary settings are slightly restrictive, providing room for more easing. Interest rate cuts could boost consumer sentiment and growth in retail spending in fiscal 2026.
Recent headwinds to goods consumption are also easing. First, a reversal of the huge mix shift to goods from services that occurred during the lockdowns is complete.
The gradual structural shift to a greater share of services consumption, away from goods, is a slight headwind but much less impactful than the recent unwinding of pandemic distortions. Second, the savings rate is back to normal levels.
During the cost-of-living crisis, marked by declining real incomes, households supplemented their spending by drastically dropping the savings rate.
By March 2025, the savings rate had recovered to over 5%, from below 2% in 2023. Although the overall outlook is positive, we expect some categories to fare relatively better.
We forecast hardware and takeaway sales growth to outperform as the construction market and consumer sentiment improve, respectively.
The report goes on to call out how investors can use this as an opportunity as well as which shares are best places to take advantage of this positive outlook. The report is available for Morningstar Investor subscribers.
You’re able to find previous editions of Chart of the Week here.