Australian retail sales keep hitting new all-time highs, but new research from Deloitte shows it is inflation, and not increased customer demand driving the record sales growth.

Deloitte Access Economics just issued its quarterly retail report, ‘Retail’s Turning Point’ which warns that sales figures are artificially bolstered by the current inflation level.

Figures released today by the ABS show the economy grew by 0.9 per cent in the June quarter, up 3.6 per cent year-on-year, with household spending up 2.2 per cent.

While discretionary categories helped boost retail spending during June, “cracks are starting to show as the economy faces a number of challenges,” according to the report’s author David Rumbens.

“Retail prices increased 4.8 per cent through the year to the June quarter, with the largest price rises seen in food and household goods.

“On a quarterly basis, overall retail price growth has already exceeded sales volume growth in both the March and June quarters.”

By the end of the year, retail sales growth will be up 3 per cent, while retail price growth will be up 5.9 per cent, according to Deloitte.

“Having prices as the main driver of nominal retail sales – or top line revenue – is relatively unfamiliar for retail,” the report notes.

“As consumers rein in their discretionary retail spending, most non-food categories are likely to reach their turning point in annual price vs volume growth in the 2022 December quarter.”