Australia’s retail industry is urging the federal government to introduce a temporary cut to diesel fuel excise, as rising transport and supply chain costs begin to weigh heavily on businesses, employment and long-term viability.

New data from the Australian Retail Council shows that increasing expenses across fuel, freight and logistics are now directly influencing how retailers operate, with many already reducing staff and scaling back investment.

ARC chief executive Chris Rodwell said the sector is facing mounting pressure at a time when consumer confidence remains at historic lows. He warned that businesses are being squeezed from both sides, dealing with higher operating costs while demand remains uncertain.

Survey results indicate that the impact on employment is already significant. Around 58 per cent of retailers say current conditions are leading to staff reductions, with 11.1 per cent reporting substantial cuts. No businesses surveyed said they were increasing hiring.

Photo by Jennifer Latuperisa Andresen

Concerns extend beyond staffing levels, with many retailers questioning their ability to remain profitable if conditions persist. About 82.8 per cent said ongoing disruption would have a serious impact on profitability, while 34.5 per cent warned it could threaten their survival or force closure. A further 7.8 per cent said they would need to shut down if the situation continues for several months.

Cost pressures are being felt across the board. Around 90.6 per cent of businesses reported higher freight costs, with more than half experiencing increases above 10 per cent and nearly one in five seeing rises above 25 per cent. At the same time, 67.2 per cent said fuel costs are having a significant or very significant effect on their operations.

Many retailers are attempting to absorb these increases, with 55.6 per cent taking on at least part of the additional cost. However, 24.8 per cent said most or all of the increases will need to be passed on to customers, raising the prospect of higher prices.

The outlook for the sector remains bleak, with 96.6 per cent of businesses expecting conditions to deteriorate over the next 12 months. More than half, or 50.4 per cent, said supply chain challenges are already having a significant or critical impact on their operations.

Retailers are calling for a range of measures to ease pressure, with 76.1 per cent supporting a temporary reduction in diesel fuel excise. Around 79.3 per cent want stronger action to secure global fuel supply, while 72.6 per cent back energy cost relief for businesses and 59.8 per cent support broader tax measures. Investment in supply chain resilience was also identified as a priority by 79.3 per cent of respondents.

Rodwell said the retail sector, which employs around 1.4 million Australians, is often an early indicator of wider economic conditions. He warned that without intervention, rising costs are likely to translate into further job losses, business closures and increased prices for consumers.

He added that alongside short-term relief, longer-term reforms are needed to reduce regulatory complexity and compliance costs, which continue to weigh on productivity and business resilience.