Australian Stores See Record Sales With Rates at Lowest Levels

Australia’s A$249 billion ($258 billion) retail industry will see its best-ever month of sales in December as the cutting of interest rates to record lows revives flagging consumer sentiment, an industry group said.

Sales on Boxing Day, a public holiday that’s traditionally one of the busiest in the country’s retail calendar, will rise 2.5 percent from a year earlier to A$1.8 billion, according to a forecast from the Australian National Retailers’ Association, or ANRA. Sales during December, the busiest shopping month of the year, may total A$28.4 billion, the group said in an e-mail on Dec. 21.

“Australians are becoming very savvy about sales,” Chief Executive Officer Margy Osmond said in a phone interview today. “Merging of the digital sales with the actuality of in-store activity on Boxing Day is what customers want and it’s going to be the way of the future. The icon retailers would tell you their online sales have been very successful and today the stores are packed.”

Household spending power has been fueled by Australia’s central bank cutting its benchmark interest rate to record lows this month. Consumer confidence that had been negative for 10 out of the previous 12 months rebounded to a 19-month high in November.

“Christmas sales may turn out to be fairly flat, but it’s great to think that we might get a spike in this post Christmas sale period” after the last interest cut, said Osmond.

Sales Rise

Myer Holdings Ltd. (MYR), the country’s largest department-store company, posted its first annual increase in quarterly sales since 2009 Nov. 15, and second-ranked David Jones Ltd. (DJS) said revenue in the period rose for the first time in two years.

The direction of consumer spending is being closely watched by Australia’s central bank as a slowdown in mining investment puts pressure on other sectors of the economy to take up the slack, Reserve Bank of Australia governor Glenn Stevens said in a Nov. 20 speech in Melbourne.

“The question will be whether other areas of domestic demand start to strengthen,” he said. Household spending behavior is “not amenable to accurate short-term forecasting.”

The slowdown in growth prospects means Australia’s government probably won’t deliver a pledged budget surplus in the year through June 2013 as a result of the weaker economy, Treasure Wayne Swan said in a Dec. 20 news conference.

Best Performance

The 3.9 percent increase in December sales that ANRA forecasts would be the best performance for that month since 2008, according to data from the Australian Bureau of Statistics, which showed a 2.9 percent gain last year and a 2.3 percent improvement in 2010. The previous monthly record was made in December 2011, with sales totaling A$27.3 billion, according to the bureau, which has data going back as far as April 1982.

Still, the percentage increase falls well behind a long-term average of about 6 percent growth a year, ANRA spokeswoman Frith Rayner said by phone from Canberra.

Interest rate cuts didn’t look to be having much effect on households’ spending habits yet, JPMorgan Chase & Co. economists led by Stephen Walters said in a note to clients Dec. 14.

“There is little sign of traction from the 175 basis points of easing delivered so far” the economists wrote. Better consumer sentiment is “irrelevant without an improvement in spending, which clearly has not occurred yet,” they wrote.

To contact the reporters on this story: David Fickling in Sydney at dfickling@bloomberg.net; Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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