Boom times ahead, says retail tycoon

SYDNEY: Australia is heading for its next big boom, says Gerry Harvey, billionaire chairman of the nation's largest electronics seller, after a report showing retail sales surged by the most in eight months.

Households, buoyed by the biggest three-month surge in employment in three years, are spending more at department stores and on clothes even as Reserve Bank Governor Glenn Stevens leads the world in raising interest rates.

Harvey, the chairman of Harvey Norman Holdings, believes that consumer spending, which accounts for more than half of an economy that has grown for 18 years, will strengthen.

"I've been saying for months now that the economy is recovering quite strongly and my belief is that we're on the way to the next big boom."

Retail sales jumped 1.4 per cent in November from October, the Bureau of Statistics said this week - almost five times the median forecast of 12 economists surveyed by Bloomberg.

Sales at Harvey Norman stores rose in October and November and "I'm pretty happy" about December turnover, Harvey said.

The dollar jumped to a one-month high against the US currency after the retail sales report as investors bet that resurgent consumer spending will force Stevens to raise interest rates again as soon as next month. It traded at US91.70c in Sydney yesterday.

Stevens boosted the overnight cash rate on December 1 by a quarter percentage point for an unprecedented third month to 3.75 per cent and investors are betting on a 58 per cent chance of a quarter-point increase to 4 per cent at the bank's next meeting on February 2, according to Bloomberg calculations. Chances of a quarter-point move in March are at 100 per cent.

Spending on clothes rose 2.5 per cent in November, the biggest jump since last March, when the Government was distributing more than A$20 billion ($25 billion) in cash to households to cushion the economy.

The sales report also shows consumers spent 1.6 per cent more on food, and an extra 1.1 per cent at department stores and in restaurants, cafes and fast-food chains.

"Aussie consumers went on a shopping spree during November," said Craig James, a senior economist at Commonwealth Bank of Australia. "Department stores and large retailers were the big winners."

Shares of David Jones, Australia's largest department-store chain, rose 0.8 per cent and Harvey Norman stock surged 3.7 per cent on Thursday.

Harvey said, "The retail sector has been recovering very strongly since April last year, and most retailers will tell you that. The economy in Australia is recovering strongly."

Coopers Brewery said beer sales had surged in the past six months and forecast it would sell more than 60 million litres this year for the first time.

Boxing Day sales at JB Hi-Fi, the best-performing retailer in Australia's benchmark stock index last year, were a lot better than a year earlier, chief executive officer Richard Uechtritz told the Australian newspaper. Sales of new cars and trucks surged a record 15.9 per cent last month from a year earlier, driven by Government tax breaks on vehicle purchases.

Consumer confidence jumped in October to near its highest level in almost six years, before falling in November and last month after Stevens and his board increased interest rates.

- BLOOMBERG