The trade war antics of US president Donald Trump have taken the wind out of retail sales in Australia.
KPMG’s Retail Health Index (RHI) for June has found consumer confidence received a knock-out pummelling, just as it was expected to return to positive territory in the second quarter of 2025.
Consumers battened down the hatches and pared back spending in response to the uncertainty created by the US administration’s change in trade policy.
The index is anticipated to tip just above zero in the June quarter, although this is slightly below the earlier projected recovery path.
“The escalation of trade tensions has emerged at a delicate point in Australia’s economic cycle, just as domestic conditions and the mood of consumers were beginning to improve following the first interest rate cut in nearly five years,” the report said.
“The RHI has been kicked down the road a little as consumption and confidence retreat in the face of increased economic uncertainty.
“Even ignoring the fundamental question as to whether tariffs are good or bad policy, the more immediate challenge for Australian retailers is the uncertainty that the policy creates, torpedoing (at least for the moment) a recovery in consumer (and retailer) confidence.”
The report said more Australians were choosing to shop online, with savvy households looking for deals and keeping their budgets tight. This resulted in more activity but lower average spending per household.
For the retail sector, it said there may be a pause in investment decisions; or at worst, key investments shelved until there are clearer signs of a more stable geopolitical environment.
Retailers were also concerned about supply chain security, plus how, when, and where they should invest capital to grow their markets and market share.
In the short term, consumers and retailers have adopted a wait-and-see approach.
But overall, there were still signs of forward momentum which were expected to improve in the medium-term.
