Australia Facing Next Boom, Billionaire Harvey Says

By Jacob Greber and Heidi Couch

Jan. 8 (Bloomberg) -- Australia’s economy is heading for its “next big boom,” according to Gerry Harvey, billionaire chairman of the nation’s largest electronics seller, after a report showed 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 clothing even as central bank Governor Glenn Stevens leads the world in raising interest rates. Consumer spending, which accounts for more than half of an economy that has grown for 18 years, will strengthen, said Harvey, 70.

“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,” the chairman of Harvey Norman Holdings Ltd. said in an interview with Bloomberg television yesterday.

Retail sales jumped 1.4 percent in November from October, the Bureau of Statistics said in Sydney yesterday. The gain was almost five times the median forecast of 12 economists surveyed by Bloomberg News.

Sales at Harvey Norman stores rose in October and November, and “I can’t tell you what we got, but I’m pretty happy” about December turnover, Harvey said.

The nation’s currency jumped to a one-month high against the U.S. dollar after yesterday’s retail sales report as investors bet resurgent consumer spending will force Stevens to raise interest rates again as soon as next month. It traded at 91.70 cents at 10:01 a.m. in Sydney today.

Rate Outlook

Stevens and his board boosted the overnight cash rate target on Dec. 1 by a quarter percentage point for an unprecedented third month to 3.75 percent.

Investors are betting there is a 58 percent chance of a quarter-point increase in the benchmark rate to 4 percent at the central bank’s next meeting on Feb. 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 9:42 a.m. Chances of a quarter-point move in March are at 100 percent.

Spending on clothes rose 2.5 percent in November, the biggest jump since March 2009, when Prime Minister Kevin Rudd’s government was distributing more than A$20 billion ($18 billion) in cash to households to cushion the economy against the global recession.

Yesterday’s report also shows consumers spent 1.6 percent more on food, and an extra 1.1 percent at department stores such as David Jones Ltd. and in restaurants, cafes and fast-food chains.

‘Shopping Spree’

“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 yesterday for the first day in four, advancing 0.8 percent. Harvey Norman stock surged 3.7 percent.

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

Coopers Brewery Ltd. said yesterday that sales of beer surged in the past six months and forecast it would sell more than 60 million liters in 2010 for the first time.

Boxing Day sales last month at JB Hi-Fi Ltd., the best performing retailer in Australia’s benchmark stock index in 2009, were “a lot better” than a year earlier, chief executive officer Richard Uechtritz told the Australian newspaper last week.

Auto Sales

Sales of new cars and trucks surged a record 15.9 percent in December from a year earlier, driven by government tax breaks on auto purchases, the Federal Chamber of Automotive Industries said this week.

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

“Confidence had sharply rebounded to one of the highest levels on record,” said Kieran Davies, chief economist at RBS Group Australia Ltd. in Sydney, referring to the October figures.

“Although there are no further government giveaways to temporarily boost spending, the fundamentals have shown a significant improvement,” he said. “Unemployment looks like it has peaked at less than 6 percent.”

Australia’s economy, one of few in the world to skirt last year’s recession, is generating more jobs than the central bank and government forecast early in 2009.

Jobs Boom

Employers added 99,500 new jobs in the three months through November, boosted by companies such as Chevron Corp., which is expanding liquefied natural gas ventures in Western Australia to meet rising global demand for energy. The jobless rate fell to 5.7 percent in November from 5.8 percent in October.

The nation’s trade deficit narrowed in November to A$1.7 billion from A$2.8 billion in October, as iron ore and farm exports jumped, a separate report showed yesterday.

Iron ore shipments from Western Australia’s Port Hedland, the world’s largest bulk exporting port, will double in three years as BHP Billiton Ltd. expands its overseas sales of the steelmaking ingredient, Andre Bush, the city’s Port Authority chief executive officer, said in an interview on Jan. 6.

Yesterday’s reports are “consistent with interest rates heading higher,” said RBS’s Davies said.

To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.net; Heidi Couch in Sydney at hcouch@bloomberg.net