We apply a spherical harmonic analysis to the Point Source Redshift Survey
(PSCz), to compute the real-space galaxy power spectrum and the degree of r
edshift distortion caused by peculiar velocities. We employ new parameter e
igenvector and hierarchical data compression techniques, allowing a much la
rger number of harmonic modes to be included, and correspondingly smaller e
rror bars. Using 4644 harmonic modes, compressed to 2278, we find that the
IRAS redshift-space distortion parameter is beta = 0.39(-0.12)(+0.14) and t
he amplitude of galaxy clustering on a scale of k = 0.1h Mpc(-1) is Delta (
g,0.1) = 0.42 +/- 0.02. Combining these we find the amplitude of mass pertu
rbations is Delta (m,0.1) = (0.16 +/- 0.04)Omega (-0.6)(m). While this is c
ompatible with results from the cosmic microwave background (CMB), with a s
mall degree of tilt, it disagrees with the amplitude of matter perturbation
s estimated from the abundance of clusters by a factor of 2, independent of
cosmology. A preliminary model fitting analysis combining the CMB with eit
her the PSCz or cluster abundances shows that the cosmological matter densi
ty parameter Omega (m) = 0.29 +/- 0.09, and the IRAS bias parameter b = 1.2
2 +/- 0.28. However, the cluster abundances suggest that Delta (m,0.1) = 0.
60 +/- 0.09 and n(s) = 0.96 +/- 0.03, while the PSCz requires Delta (m,0.1)
= 0.34 +/- 0.05 and n(s) = 0.81 +/- 0.05. Given the physics of galaxy form
ation is poorly constrained, we conclude that IRAS galaxies and mass are on
ly partially correlated.