Australia: Focus on wages and employment this week - BNZ

Analysts at BNZ suggest that it’s a busy week for Australia with the two most significant pieces of data being Q3 Wages on Wednesday and Employment on Thursday.

Key Quotes

“These two pieces will be important for the outlook for monetary policy with the RBA clearly wanting to see evidence of a reduction in spare capacity and a lift in wages growth before they can be confident that inflation will lift towards the 2-3% target band. Also out in the week is the NAB Business Survey on Tuesday, along with two potentially interesting RBA speeches —Deputy Governor Debelle on Monday and Assistant Governor Ellis on Wednesday.”

“The WPI on Wednesday will be closely watched to see whether subdued wages growth has bottomed in Australia. This quarter the market expects wages to increase 0.7% q/q and 2.2% y/y, boosted by the increase in the minimum wage which was hiked 3.3% on July 1. Although NAB’s forecast is similar, our forecast is on the straddle of the 0.6/0.7% divide and we accordingly think the risks could be slightly to the downside of the market consensus. Our analysis of prior minimum wage increases suggests the minimum wage could add an extra 0.1% to wages growth on top of the Q2 0.5% outcome, slightly softer than the market and the RBA’s estimate of a 0.2% boost.”

“As for Employment on Thursday, the underlying story remains of positive forward indicators that suggest the recent run of strong employment growth should continue. Trend employment growth of 24k a month will continue to put downward pressure on the unemployment rate and NAB thinks the unemployment rate is likely to reach 5¼% by mid-2018.”