Focus On Labour Market Developments

This week the focus will be on the labour market which has remained surprisingly strong. The Q1 Wage Price Index is released Wednesday and April employment Thursday. Given the tightness of the labour market and the RBA’s warning on wage growth "given trend productivity growth", there is likely to be significant attention on these releases. Also the federal budget is announced Tuesday.

• NAB’s April business survey is out Monday. Business conditions have eased but remain above the historical average while business confidence is low it has been volatile and is still positive. The price/cost components will also be watched closely.
• CBA’s household spending indicator for April also prints Monday. This series has a high correlation with retail sales values.
• Tuesday at 1930 AEST the federal government’s budget is presented. RBA Governor Bullock said that Treasurer Chalmers has reassured her that inflation is at the front of his mind. There seems to be a lot of pressure to increase spending and stimulate growth though. Deficits beyond the current financial year are expected to worsen and Treasury is to forecast inflation below target by end-2024, a year ahead of the RBA.
• Consensus is expecting Wednesday’s Q1 WPI to rise 0.9% q/q to be up 4.2% y/y, in line with Q4. This series usually comes close to consensus.
• On Thursday April employment data is published. It has been volatile lately and so it will be important to look at recent averages. It fell 6.6k in March after jumping 117.6k in February. A moderate 23.7k rise with a tick up in the unemployment rate to 3.9% is projected. Given the RBA is "vigilant" to upside inflation risks and the labour market remains tight, this release will be monitored closely.
• The RBA’s Assistance Governor (Economic) Hunter is scheduled to speak on Thursday at 0940 AEST.