Harvey Norman warns of sales slowdown following federal budget, rate rises

Retail pioneer Harvey Norman blames changes announced in the federal government’s budget and overall cost-of-living pressures for a slow down in its sales, following a strong start to trading.

In its latest market update, Harvey Norman took a thinly veiled swipe at the budget, saying sales stalled following the announcement.

“Consumer confidence softened further following the May 2026 federal budget, resulting in more cautious discretionary spending,” the company said.

Harvey Norman stopped short of completely blaming the government, also highlighting a challenging second quarter led by higher fuel and energy costs, increase in freight-related expenses and three consecutive interest rate hikes.

Other Australian retailers including JB Hi-Fi also noted the challenging environment when they announced their results.

During an earnings call in mid-August, JB Hi-Fi chief executive Nick Wells said he was optimistic that huge sales periods, including Black Friday, would help pick up sales after a slow start to the new financial year caused by higher rates and fuel prices.

The Albanese government pushed through changes to capital gains taxes and negative gearing, announced in its May budget, calling it a once-in-a-generation overhaul to the system.

From July 1, 2027, the current 50 per cent capital gains tax discount will be replaced with inflation-adjusted indexation.

Additionally, a new minimum 30 per cent tax rate will apply on capital gains from July 1, 2028, ending the incentive for asset-rich but cash-poor Aussies to sell assets when their income falls to maximise tax advantages.

Negative gearing has also been scrapped for those trying to get into the market on existing dwellings.

Current landlords and anyone who builds a new property can still use negative gearing.

Harvey Norman announced sales rose by 3.1 per cent to $9.6bn, with $6.6bn of franchisee revenue coming from Australia.

Its said its net profit rose 15.2 per cent year-on-year for the first half, driven by strong household budgets into the Christmas trading period.

Harvey Norman chairman Gerry Harvey said the business was well placed to deliver long-term sustainable growth to shareholders.