Wages and jobs will dominate the news flow in Australia this week for those looking at substantive issues and not at ephemera like the future of the Labor Party.
In New Zealand there’s an interest rate decision tomorrow, in China there’s more key data on Thursday and in the US there’s inflation and retail sales data to be released.
With the Reserve Bank again downgrade its forecasts for growth, wages, and inflation for the next two years, this week’s releases will add to the sense that no one quite knows what is happening in the economy.
The 4th Statement on monetary Policy for 2019, issued on Friday filled out the hints in the statement issued after last Tuesday’s November board meeting.
The RBA said wage growth was “no longer expected to pick up” as it forecast subdued wage growth of 2.3% through the end of calendar 2021.
That is very different to the Morrison government’s 2019-20 budget forecast wage growth of 2.75% and 3.25% the following year. That is just not going to happen.
The RBA said it expects inflation to undershoot its 2-3% target over the next couple of years to be 1.9% by the end of 20201 and unemployment to stay above its 4.5% goal at 4.9% by the end of 2021.
That justifies the case for the central bank to keep interest rates low for an “extended period of time”.
Wednesday’s Wage Price Index is expected to show no change from the 2.3% annual rate of the June quarter and a rise of 0.5% quarter on quarter.
Thursday’s labour force data is expected to show a 20,000 rise in employment, but a slight rise in unemployment back to 5.3%.
Tomorrow sees the NAB monthly business survey reporting that business confidence and conditions. The AMP’s chief economist, Dr. Shane Oliver says the Westpac/MI consumer survey on Wednesday is likely to show continued softness on consumer confidence.
Profit announcements are due from Elders later today and Incitec Pivot tomorrow.
Dr. Oliver says in the US, the October core Consumer Price on Wednesday to remain around 2.4% year on year and retail sales on Friday to bounce back after a dip in September and industrial production (also Friday) to remain soft.
The third-quarter earnings reports continue this week with major retailers dominating.
In Europe, the outcome of yesterday’s Spanish general election will be watched closely and the results could again see a hung parliament and more instability.
In Asia, there’s Japanese September quarter GDP growth on Thursday which is expected to come in at around 0.2% quarter on quarter or an annual 1.4%.
Dr. Oliver says Chinese economic activity data for October (Thursday) is expected to show a pullback in industrial production growth to around 5.4% year on year after the bounce seen in September, retail sales unchanged at around 7.8%yoy and fixed asset investment growth also unchanged at around 5.4%yoy. Credit, car sales and money supply data will also be released.
The RBNZ is expected to sit on rates at its meeting tomorrow but again make it clear it will lower rates if it sees the need (like its Australian counterpart).