Nov. 11 (Bloomberg) -- Australian business confidence rose to a nine-year high in October as companies such as hotelier Accor SA boosted sales and hired more workers, fueling expectations the central bank may raise interest rates for a second time in a month. The business confidence index rose 3.3 points to 22.7, the highest since the third quarter of 1994, according to a National Australia Bank survey released in Melbourne. A reading of more than zero means companies expect business to improve. The Australian dollar gained after the report added to signs economic growth is accelerating. Companies from brewer Lion Nathan Ltd. to St.George Bank Ltd. have reported increased earnings the past week, while government reports have shown the jobless rate at a 14- year low and retail sales rising at the fastest pace in 4 1/2 years.
``There's been a big rebound in hotel occupancy after the drop in tourism caused by SARS and Iraq earlier this year,'' said Peter Hook, a spokesman for Accor's Australian unit, the nation's largest hotel operator with almost 100 hotels. ``The business conference market has shown a large recovery as companies see a better outlook.'' The occupancy rate at Accor hotels, which include the Novotel and Ibis chains, will rise to 80.7 percent in November from about 64 percent in June, Hook said. The company has increased its casual workforce by 20 percent since then. A pickup in confidence may spur business investment and hiring, underpinning economic growth and prompting the central bank to raise borrowing costs in December following the first interest-rate increase in 17 months last week.
Higher Interest Rates
The Australian dollar rose close to a six-year high and bonds were little changed after the report was released. The dollar traded as high as 71.57 U.S. cents in Sydney, up from 71.46 cents. It was at 71.50 cents at 4:30 p.m. in Sydney. The yield on the 6.5 percent bond maturing May 2013 fell 1 basis point, or 0.01 percentage point, to 5.92 percent. ``The results of this survey only adds to the argument for higher interest rates,'' said Alan Oster, chief economist at National Australia Bank, the nation's largest lender by assets. ``The Reserve Bank will increase the cash rate by 25 basis points at each of its next two meetings in December and February.'' The Reserve Bank of Australia raised the overnight cash rate target a quarter percentage point to 5 percent last week. It will raise the benchmark interest rate to 5.25 percent in December, according to 15 of 22 economists surveyed by Bloomberg News. ``Globally exposed industries, such as miners, manufacturers and tourism companies, have taken over as key drivers of growth,'' Oster said. A pickup in global growth is increasing demand for commodity exports, and a recovery in tourism after the SARS outbreak has fueled sales at hotels, retailers and airlines. Today's survey showed the business conditions index, which measures sales, profit and employment in October, rose 2 points to 18. The sales index rose 3 points to 26 and the profit index increased 1 point to 18. Retail sales rose 2.7 percent in the third quarter from the previous three months, the largest increase since 1999, and the October unemployment rate fell to 5.6 percent, the lowest since December 1989, from 5.8 percent in September.
Rising Profits
Among companies reporting higher earnings, National Australia Bank said today that full-year profit rose 17 percent to A$3.96 billion ($2.8 billion), the second highest reported by an Australian company. National Australia Bank's profit has been driven by record mortgage lending as a housing boom fuels economic growth. ``The outlook for the Australian and New Zealand economies remains healthy and there are signs of improving global economic activity,'' said National Australia Bank Chief Executive Frank Cicutto. ``The combination of strong domestic activity and better global economic news mean that interest rates are likely to rise in fall of the major economies in which we operate.'' Lion Nathan, the nation's second-largest brewer, increased second-half profit by 13 percent after it sold more Tooheys Extra Dry and other higher-priced beer. Net income rose to A$69.8 million in the six months ended Sept. 30. St.George Bank, the nation's fifth-largest lender, said last week that second-half profit rose 29 percent to A$333 million fueled by rising mortgage lending. //www.bloomberg.com