UPDATE 2-Australia's Woolworths sales up, but shares dip

* Australia food, liquor Q4 like-for-like sales up 7.9 pct

* Big W discount store Q4 like-for-like sales jump 11.5 pct

* NZ supermarkets sales growth picks up in Q4

* Shares slip 0.4 percent off five-month high (Adds analyst, CEO comments)

By Sonali Paul

MELBOURNE, July 22 (Reuters) - Woolworths Ltd (WOW.AX), Australia's largest supermarket chain, reported a 7.5 percent rise in sales on a normalised basis, powered by strong growth in Australian food and liquor.

Woolworths, which also owns Big W discount stores and the Dick Smith electronics chain, said continued sales growth highlighted the strength of the Australian economy, which has dodged a recession partly as a result of government handouts.

While the result was in line with market forecasts, recent comments from other retailers and official sales data had sparked a jump in Woolworths' share price over the past week as investors bet it might beat expectations.

Its shares eased 0.4 percent on Wednesday, coming off a five-month high, while the broader market .AXJO rose 0.4 percent.

Fund managers and analysts called the sales growth solid and Deutsche Bank said it expected the group's profit growth to come in around the top end of its forecast range of 11-14 percent on a 52-week comparative basis.

"I wouldn't be surprised if there were some small upgrades. Woolies gets fantastic operating leverage off a small increase in sales," said Martin Duncan, an analyst at Fortis Investment Partners.

Woolworths Chief Executive Michael Luscombe stood by the group's profit growth forecast, saying there were "no concerns about our guidance".

Total sales for the year ended JUne rose to A$49.6 billion ($40.6 billion).

The retailer, whose main rival is Wesfarmers (WES.AX), had forecast sales growth in the high single digits for the full year.

Australian food and liquor sales from stores open for at least a year jumped 7.9 percent in the fourth quarter, which the company attributed to price cutting, improved store layouts and its rewards programme, which gives shoppers discounts on petrol.

In recession-hit New Zealand, fourth-quarter like-for-like sales rose 5.5 percent, up from growth rates of around 3 percent in the earlier quarters of the year, helped by store refurbishments and a more solid supply chain.

The group's Big W discount chain reported like-for-like sales growth of 11.5 percent in the fourth quarter, bolstered by government cash handouts to support consumer spending.

Its pubs improved in the fourth quarter, with like-for-like sales up 2.3 percent.

Luscombe declined to comment on speculation that Woolworths might push into hardware retailing, an area dominated by Wesfarmers' Bunnings chain. ($1=1.223 Australian Dollar) (Editing by Chris Lewis)