A speech by one of the Reserve Bank of Australia’s top officials will provide an opportunity to respond to last week’s extraordinarily strong labour force figures and signal whether it changes the timing of a future interest rate rise.
Economists certainly believe it does.
The RBA has repeatedly said a rise in the cash rate from 0.1 per cent will not happen until inflation rate is within the two to three per cent target, which will need wages to be growing at three per cent and a jobless rate closer to four per cent.
It had not expected to see these events until 2024 at the earliest.
However, the recovery in employment has been much stronger than either the RBA or Treasury had been anticipating.
AMP Capital chief economist Shane Oliver, and other economists, have been anticipating the first cash rate rise being in 2023.
End of 2022?
“After the strong jobs numbers there is a risk it may come in late 2022,” Dr Oliver said.
In the run-up to Dr Ellis’ speech, key figures for retail spending, job vacancies and international trade will be released.
The Australian Bureau of Statistics will reveal preliminary retail trade numbers for May on Monday, which economists expect will see a further 0.5 per cent increase, building the 1.1 per cent rise in the previous month.
Tuesday will see the weekly ANZ-Roy Morgan consumer sentiment index – a pointer to future household spending.
Confidence has been shaky as of late due to the recent 14-day Melbourne COVID-19 lockdown, and won’t be helped by a growing virus outbreak in Sydney’s eastern suburbs.
However, the falling unemployment rate should provide some support.
The ABS will also release its latest job payrolls report to provide a guide to the health of the labour market in the early stages of June.
It will also issue preliminary figures for international trade for May on Wednesday.
On the same day, the National Skills Commission will release its final skilled vacancy report for May. Its preliminary data showed a 1.9 per cent increase for job advertisements posted on the internet.