The retail trade industry is entering 2026 as the least confident industry according to new data from Roy Morgan.
Retail across the board had a business confidence level of 71.1 in December 2025, which is well-below the base level of 100. This is behind the agricultural industry, which sits at 79.3, and far below wholesale trade which sits at 94.4.
Construction and accommodation and food services are also below the base level of 100.
Roy Morgan CEO Michele Levine said retail’s low score fell during the most important retail period of the year: Christmas sales. In the six-week lead up to Christmas, Roy Morgan and the Australian Retailers Association (ARA) projected that Australians would spend a record $72.4 billion, up 4 per cent.
Levine said that despite record retail spending during the pre-Christmas period, confidence in the industry has plunged 40.6pts (down 36.3 per cent) from a year ago and is at its lowest for two years since late 2023.
“The combination of rapidly increasing inflation and the prospect of interest rate cuts in the near future has clearly hit confidence among Australian retailers hard,” Levine said.
“In addition, confidence in the Agriculture, Forestry & Fishing industry is at just 79.3 and the lowest average Business Confidence over a sustained period of the last three years (2023-25) of only 80.4 – clearly the lowest average of any of the 18 industries over this extended period.”
But retail’s low confidence was not enough to dampen overall business confidence across the country. Overall business confidence jumped 6.3 points to 105, which is its highest rating for nine months since March 2025 (then 106).
The result followed the Reserve Bank’s decision to leave interest rates unchanged at 3.6 per cent for a fourth straight month in December.
Within its data, Roy Morgan noted that over a third of businesses (35.1 per cent, up 7.1 ppts) believe their business is ‘better off financially’ than this time last year and 46.4 per cent (up 6.4 ppts) say they expect the business to be ‘better off financially’ this time next year.
Meanwhile, 57 per cent (up 2.8 ppts) say they expect ‘good times’ for the Australian economy over the next year while 40.8 per cent (down 2.9ppts) say they expect ‘bad times’.
Business Confidence is 4.8pts below the long-term average of 109.8, but is a significant 23.5 points higher than the coinciding ANZ-Roy Morgan Consumer Confidence of 81.5 on December 8-14, 2025.
Levine said the rising official inflation has been foreshadowed in the ANZ-Roy Morgan Inflation Expectations, which increased to 5.6 per cent in mid-December – its highest level for two years since December 2023.
The official inflation figure from the Australian Bureau of Statistics (ABS), now released monthly, has increased from 1.9 per cent in June 2025 and nearly doubled to 3.4 per cent in November 2025 – only five months later.
According to Levine, the sharp rise in inflation in recent months was unexpected and led the Reserve Bank of Australia (RBA) to leave interest unchanged at three consecutive meetings. Prior to that, the RBA had cut interest rates by 0.25 per cent in the three months of February, May and August last year by a total of 0.75 per cent to 3.6 per cent.
“In addition, the ASX 200 share-market has recovered significantly in December, increasing from a low of 8,416.5 on November 21, 2025, to 8,795.7 on December 23, 2025,” Levine added. “This represents an increase of 379.2 points (4.5 per cent) in just over a month for what is often called the ‘Santa Rally’ into Christmas.”
On a state-by-state basis, Tasmania recorded the strongest business confidence overall, at 134.6. That followed the re-election of Jeremy Rockliff’s Liberal Government and the Government’s successful push to secure Parliamentary approval of the construction of Hobart’s new stadium in early December.
Victoria was also higher than the national average, at 113.6, followed by Western Australia (105.9) and New South Wales (103.4). Business confidence is below the neutral level of 100 in Queensland (98.6) and South Australia (87.9).
“At an industry level, the most confident industry in the final months of 2025 is Electricity, Gas, Water & Waste on 129.3, just ahead of the Mining industry on 126.2 – both well over 20pts above the national average,” Levine said.
“The Mining industry was significantly boosted in October when Prime Minister Anthony Albanese signed a multi-billion-dollar deal with US President Donald Trump covering access to and development of Australia’s large critical minerals and rare earth resources.
“Other confident industries include Professional, Scientific & Technical Services on 116.6, Rental, Hiring & Real Estate Services on 114.1, Financial & Insurance Services on 112.4, and Health care & Social Assistance on 111.4, all significantly higher than the national average.”