Two key economic data this week could impact undecided voters as a lengthy six-week federal election campaign draws to a close.
In Thursday’s labor force report for April, the unemployment rate could fall below four percent to its lowest level since 1974, a result a struggling Morrison administration will soon claim as a victory for its economic management.
But 24 hours earlier, Wednesday’s pivotal wage figures will confirm that despite all the government’s clamor about a strong economy, voters’ wages are growing at about half the rate of inflation.
Economists predict that the wage price index — data used by the Reserve Bank of Australia and Treasury to assess wage growth — grew a slightly more positive 0.8 percent in the March quarter.
However, this would still leave the annual rate at 2.5 percent.
While it is the highest rate since 2014, as of the March quarter, at 5.1 percent, it is significantly below the annual inflation rate.
Even if economists are wrong and wages turn out to be stronger because of a tight labor market, there will be little joy for borrowers.
“An upside surprise would show wage pressures more frequent than the RBA thought in May, raising the risk of a super-high 40-50 basis point rate hike in June,” said Taylor Nugent, an economist at the National Australia Bank.
As it stands, the RBA is widely expected to raise the spot rate by 25 basis points to 0.6 percent at its June board meeting, following the first rate hike in more than a decade earlier this month.
The RBA will release the minutes of its May board meeting on Tuesday.
However, as RBA Governor Philip Lowe held a rare press conference after the board meeting, as well as the central bank delivering its quarterly monetary policy statement, the minutes may not offer much news.
That statement indicated that wages are unlikely to grow faster than inflation until the end of 2023.
The week kicks off with the release of the Australian Institute of Petroleum’s weekly gasoline price report on Monday.
After the initial impact of the government’s temporary tax cut in half as part of the cost of living in the March 29 budget, gasoline prices have bounced back to $2 a liter due to persistently high oil prices on the global market.
The data week concludes with Thursday’s labor force report for April, which is expected to drop the unemployment rate to 3.9 percent from four percent, with 30,000 people expected to start working.
Meanwhile, Australian equities look poised for a positive start to the week after Wall Street staged a broad rally on Friday after another volatile week.
However, it didn’t stop U.S. stocks from finishing lower for the sixth straight week, the longest streak since 2011.
The underlying concern remains that the US Federal Reserve may not succeed in slowing the economy enough to contain the highest inflation rate in four decades without triggering a recession.
The S&P 500 rose 93.81 points or 2.4 percent to 4,023.89 and the Dow Jones Industrial Average rose 466.36 points or 1.5 percent to 32,196.66, while the Nasdaq rose 434.04 points or 3. .8 percent rose to 11,805.
Australian stock futures rose 54 points, or 0.76 percent, to 7110 in sympathy.
On Friday, the Australian benchmark S&P/ASX200 index ended 134.1 points, or 1.9 percent, to 7075.1.