Retailers are facing mixed results as 2026 rolls on, with recent data from the Australian Bureau of Statistics (ABS) showing continued resilience in household spending, just as the Reserve Bank of Australia (RBA) nudges up interest rates by another 25 basis points.
Fashion sales have driven overall household spending in March 2026, with total retail spending increasing by $2 billion or 5.7 per cent over the year to March.
Spending on clothing, footwear and personal accessories lifted 6.34 per cent in the year to March, behind stronger growth in cafes, restaurants and takeaway food services (up 7.24 per cent) and other retailing (up 10.07 per cent).
Modest growth was reported in department stores and large online retailers (up 4.75 per cent), household goods retailing (up 4.57 per cent) and food retailing (up 3.68 per cent).
Australian Retail Council (ARC) chief economist Glenn Fahey said the underlying drivers of spending and cost pressures are an important context in this growth.
He said that while overall spending is up 5.7 per cent year-on-year, this partly reflected higher costs and pockets of category strength rather than a broad lift in underlying demand.
In recent months, retail sales growth is being driven by transport costs, mostly due to increasing costs of fuel amid the Middle East conflict.
“Despite the uncertain outlook, it is encouraging to see some resilience in consumer retail spending, in particular in discretionary categories,” he said.
Spending also increased across all states and territories, with Queensland (up 6.9 per cent) and Western Australia (up 6.8 per cent) recording the strongest growth, while New South Wales (up 4.9 per cent) and Victoria (up 4.8 per cent) saw more moderate increases.
Fahey said the March data does not fully capture the protracted impacts of recent developments in the Middle East in particular.
“Unfortunately, consumer confidence remains near historic lows, and the increase in fuel, freight and energy costs is continuing to place pressure on both households and businesses,” he said. “Businesses are also carrying higher wages and higher costs of products and services.
“Those pressures are likely to weigh more heavily on spending in the months ahead.”
With that said, the resilient growth in sales shared this week by the ABS came alongside news that the RBA has lifted interest rates again.
Australian retailers believe trading conditions will become more challenging as the cash rate hits 4.35 per cent, returning to the same peak it held in 2024. The last time it was that high was in 2011.
According to the ARC, this decision by the RBA adds to an uncertain consumer outlook, with households navigating higher borrowing costs alongside rising fuel and living expenses.
Chief economist Glenn Fahey said the latest increase will create pressure on both consumers and businesses at a time they can least afford it.
“With household budgets under strain, a third consecutive rate rise is expected to reduce spending, especially on non-essential items,” Fahey said.