Australia Retail Sales Rise 0.3% on Department Stores

By Jacob Greber

Dec. 3 (Bloomberg) -- Australian retail sales rose in October as households spent more at department stores and restaurants.

Sales climbed 0.3 percent from September, when they fell 0.2 percent, the Bureau of Statistics said in Sydney today. The result matched the median forecast of 19 economists surveyed by Bloomberg News.

Household spending is helping stoke an economic expansion forecast by the central bank to accelerate in 2010, extending 18 straight years of annual growth. Governor Glenn Stevens raised the benchmark interest rate this week by a quarter percentage point for an unprecedented third month amid a rebound in consumer confidence.

“I think we’ll have record Christmas” sales, Gerry Harvey, chairman of Australia’s biggest electronics retailer, Harvey Norman Holdings Ltd., said in an interview with Bloomberg television. “We’ve had very good sales figures in October and November and I can’t think of any reason why that won’t follow into December.”

Australia’s dollar maintained gains versus the U.S. dollar. The currency traded at 92.86 U.S. cents as of 11:49 a.m. in Sydney from 92.90 cents before the retail sales report and 92.48 cents yesterday in New York.

Spending at department stores rose 1.9 percent and restaurant sales gained 1.1 percent, today’s report showed. Consumers spent 0.2 percent less on clothing.

Consumer Confidence

Hardware store group Mitre 10 said yesterday that earnings before interest and tax of A$2.67 million ($2.47 million) in October boosted profit for the four months through Oct. 31 to A$6.44 million, compared with a loss of A$239,000 for the same period a year earlier.

Consumer confidence is close to its highest level in more than two years, boosted by an increase in employment in October and higher wages.

Central bank policy makers increased the overnight cash rate target to 3.75 percent from 3.5 percent on Dec. 1, citing evidence that the economy, which skirted the global recession, “is in a gradual recovery.”

Gross domestic product rose 1 percent in the first half of the year and is forecast by the Reserve Bank to climb 3.25 percent next year and in 2011. Third-quarter GDP figures will be published on Dec. 16.

Investors are betting there is a 46 percent chance Stevens will boost the benchmark rate by a quarter point to 4 percent at the central bank’s next meeting on Feb. 2, according to interbank futures on the Sydney Futures Exchange at 6:24 a.m.

Rate Threat

Still, some retailers say the central bank’s interest-rate increases in October, November and this month will prompt consumers to reduce spending in coming months.

This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after Prime Minister Kevin Rudd distributed more than A$20 billion in cash handouts to households.

The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after this week’s central-bank decision. A basis point is 0.01 percentage point.

Christmas trading is expected to be “subdued” in New South Wales, Australia’s largest state, according to a quarterly survey published today.

“The last quarter has been disappointing for many small businesses in New South Wales, with most of the gains made during the previous quarter negated,” said Christena Singh, author of today’s Sensis Business index report.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net