Solomon Lew warns December rate rise could hit Christmas shoppers hard

Gerry Harvey might be tipping record Christmas sales and eBay might be groaning under the weight of online shoppers, but veteran retailer Solomon Lew still has concerns about the strength of Australia’s economic recovery.

Lew is the largest shareholder is Premier Investments, which owns retail chains including Just Jeans, Jay Jays, Portmans, Jacqui E, Peter Alexander, Dotti and Smiggle.

At the company’s annual general meeting yesterday, Lew said he was “cautiously optimistic” about the outlook for the Australian economy but warned a lot could depend on whether the Reserve Bank again increases the official interest rate in the first week of December.

“There is absolutely no certainty that the effects of the global economic crisis are now behind us, notwithstanding the strength of global equity markets, including our own,” he told reporters after the meeting.

“I think that the concern is whether the Reserve Bank will be raising rates in December, and if they do I think it’ll be a big dampener (for the retail sector).”

Lew has urged the RBA to hold fire until 2010 when the bank can better assess the state of the housing market and particularly the jobs market.

“My concern going forward is whether there will be jobs for the school leavers. So tied in with Christmas sales and opportunities, I think the retailers are rather wishing the rates will be left where they are at this point in time and see how things settle down after the last two rate rises.”

Lew’s caution was supported by Sally Macdonald, chief executive of upmarket fashion retailer Oroton.

While sales are up 14% over the first 17 weeks of the new financial years, Macdonald remains cautious.

“While our results are quite positive so far, we believe the market is only slightly more buoyant than it was at this time last year.”

Lew, who was formerly a major shareholder in Coles Myer, also fired a shot at the newly listed department chain Myer, warning the company it has “hard work” in front of it to compete with specialist retailers.

“The hard work is ahead of them – they have a very good management team, but it depends on the offer and whether the consumer wants to shop specialty or wants to be involved in a department store where there’s no service,” Mr Lew said.

“There’s a lot more service in specialty business today, and I think the consumers know where they want to shop.”

Lew also took a swipe at Gerry Harvey’s bullish Christmas prediction, claiming Harvey Norman “had a very poor half last year and he’s coming off a very low base”.