Interest rates and the economy return to centre stage this week, replacing the political stuff from the past couple of weeks.
But given the health of the economy, politics will likely intrude as the country starts a new financial year with the economy still stuck in low gear.
The data from the Australian Bureau of Statistics over the week and commentary from the Reserve Bank tomorrow in the wake of the July interest rate decision, are all likely be downbeat, leading to more discussion about just where the economy is going.
Two other central banks meet this week – the European Central Bank and the Bank of England – both on Thursday night, our time. They won’t change policy, as won’t the RBA.
Offshore, the June jobs data in the US on Friday night our time holds much of the attention and will again make sure pressures on markets’ sentiment remain high as analysts worry about the health of the American economy and the prospects of the Fed slowing.
US markets have a half day trading on Wednesday ahead of the Independence Day holiday (although key data on jobless benefit claims will still be released that day).
But don’t forget the release of the results of the two June surveys of Chinese manufacturing today.
Weak reports (especially for the HSBC Markit survey which showed a surprise fall in the first estimate 10 days ago) will send markets in Asia, especially Australia into another tizz.
And watch for any more comments from the Chinese central bank about liquidity needs and cash injections into its financial markets.
A highly worried central bank seemed to be making a statement a day last week to try and reassure anyone interested (and there were an awful lot of people interested) that it would not set off a credit crunch in its attempts to control unchecked bank lending.
And don’t forget there will be similar manufacturing surveys for the rest of Asia (including Australia), Europe and the US from today onwards.
Here, the flow of data – trade, retail sales and building approvals, plus the monthly survey of manufacturing activity, inflation estimates, car sales and property prices, along with no rate cut from the RBA, will confirm that the economy continues to chug along at a below a trend rate of growth.
Tomorrow’s rate decision and commentary from RBA Governor Glenn Stevens will be followed on Wednesday by a speech by the Governor, and then a second speech on Thursday from his deputy Phil Lowe.
After two months’ of silence the RBA is certainly stepping back into the public arena with a vengeance this week, thereby ensuring the economy returns to the centre of the political and economic debate.
Last Friday’s financial aggregates for May from the RBA showed bank lending for housing still sluggish… total lending is now running at 3% annual, little different to the rate of the previous couple of months, home lending is still running at 4.5% annual with no sign of a break out.
The question and answer segments after the speeches from Messrs. Stevens and Lowe will be the key parts of their appearances simply because they haven’t been in public since April.
The ABS stats on retailing trade and building approvals will be released on Wednesday and Thursday, so by Friday we should be just as informed about how the economy is going as we were a month ago.
Most economists expect no action will be taken at the July RBA meeting, though a cut is still tipped to happen before the end of the year.
In China, the official manufacturing purchasing managers’ index PMI for June is due out, and then the HSBC manufacturing PMI will be released.
Both are expected to come in under the 50 level which separates expansion (above) from contraction.
Vehicle sales for June will be released in Japan, and the US will also see car sales data and the monthly manufacturing PMI tomorrow night, our time.
Factory orders are out later in the week, but the June jobs report will be released on Friday night, our time and the consensus seems to be for a slight fall in the jobless rate to 7.5% from 7.6% and around 170,000 new jobs created in the month.
That sounds impressive, but the economy has created an average 194,000 jobs a month in the past six months (to May).
In the United Kingdom, the Bank of England will hand down its monthly rates decision.
It is an historic meeting with the Bank of England’s monetary policy meeting convening for the first time under the new Governor Mark Carney.
The European Central Bank, which also holds its meeting on Thursday, is not expected to change rates. President Mario Draghi may talk about how much longer the bank will stick with its extraordinary policy settings.
