Upcoming wages and unemployment data may have significant bearing on the Reserve Bank’s closely watched interest rate decision.
Domestic signals have taken somewhat of a back seat since US President Donald Trump’s tariff dump in early April.
But the wage price index and labour force figures, due to be published by the Australian Bureau of Statistics on Wednesday and Thursday, respectively, will be closely monitored.
They are the last remaining major data releases that will influence the Reserve Bank board’s decision when it meets to set interest rates on May 19-20.
Expectations of a rate cut have soared since Mr Trump’s tariffs roiled markets.
With global trade set to be impacted, the economic growth outlook for Australia and the rest of the world has tumbled, while cheap goods diverted to the local market could drive domestic inflation down further.
The rates market has fully priced in a 25-basis point cut for May, with traders rating a bumper 50-basis point cut at more than even odds.
At the previous board meeting on April 1, Reserve Bank governor Michele Bullock noted the labour market was still tight, which could make it harder to get inflation back down.
“There are some risks on the upside and the labour market is one of them,” she said at the time.
“Not everyone agrees, but we still think there’s tightness in the labour market.”
Ms Bullock flagged the board would keep an eye on labour market data to help guide its rates decision.
In ABS data released later in April, unemployment edged slightly higher to 4.1 per cent in March.
ANZ Bank economists expect the jobless rate to climb to 4.2 per cent on Thursday, in line with the Reserve Bank’s forecast of 4.2 per cent from its February statement on monetary policy.
But the outlook for unemployment has since worsened.
The International Monetary Fund now predicts Australia’s unemployment rate to climb to 4.5 per cent by 2026, because economic growth is expected to be slower than previously assumed.
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