• After this week’s raft of economic data, the focus next week shifts to the RBA’s June Board meeting.
  • We expect the RBA to increase the cash rate target by a ‘business as usual’ 25bp which would take the cash rate target to 0.6%, but acknowledge there is a risk the RBA opts for a larger 40bp increase.
  • Local economic data is sparse, but will centre on the Q1 22 Labour Account and the weekly payrolls figures for mid May.
  • Offshore, the ECB meets on Thursday. ECB officials have signalled an end to asset purchases by end June and the first interest rate hike to occur at the July meeting.
  • In NZ, business survey data for Q1 and card spending figures for May are due.
  • Canadian employment figures for May and US inflation, also for May, will be released.

In the week just gone by we received the final pieces of economic data for the March quarter. The national accounts confirmed that the Australian economy was strong over Q1 22, even as it was buffeted by various headwinds including the Omicron outbreak as well as the East Coast floods. The economy was powered by strength from the household sector, with spending up by a solid 1.5%. The strength reflects an unemployment rate that fell to just 3.9% in March 2022, its lowest since August 1974. Business investment was also solid, with a bright outlook for capex. Here’s an overview of the GDP figures from our Head of Australian Economics, Gareth Aird, and a detailed chart pack.

While the picture from the rear-view mirror is good, the economic outlook from here on will be in the RBA’s hands as it continues to tighten monetary policy. We have already seen consumer confidence drop lower to well below average levels, and parts of the housing market have begun to turn. There have been some tentative signs in our spending data too of some softening.

The RBA Board will meet next week and at its 7 June meeting is widely expected to raise the cash rate. In our view, there is nothing in the recent data that makes a strong case for a 40bp hike; instead, we believe the RBA will deliver a ‘business as usual’ 25bp hike to take the cash rate at 0.6%. Read Gareth’s full preview of the RBA meeting here.

Outside of the RBA Board meeting, it is quiet on the local data front. We will publish our fortnightly internal CBA card spending data for the week ending 3 June. The ABS will publish the quarterly Labour Account for Q1 22 as well as weekly payroll jobs and wages for the week ending 14 May.

Offshore, the ECB will meet on Thursday. ECB officials have signalled a road map for monetary policy over the coming months. Asset purchases will conclude by end June and the first interest rate hike will occur at the July meeting. ECB officials have also flagged that negative interest rates will end by September. This implies at least 50bp of tightening over the July and September meetings. We forecast a 25bp increase in each of the July and September meetings to take the deposit rate to 0%.

In terms of data, the NZ economic calendar ramps up as a glut of business survey data will be released. These data will help firm up estimates of the NZ Q1 22 GDP, which our ASB colleagues currently expect grew by 0.2% in the quarter. Looking ahead, a more cautious household sector, widespread capacity constraints and easing momentum in the construction sector are expected to impinge on growth over the year. Also due next week in NZ is card spending for May, which ASB expects retraced its April rebound.

Canadian labour market figures for May will print on Thursday. The Canadian labour market is tight and employment is well above its pre-pandemic levels, so we expect more modest job gains moving forward even as job vacancies remain elevated. In the US, we expect the May CPI print to show headline prices expanded strongly because of a sharp lift in retail gasoline prices. Core inflation too is expected to be strong as rents are rising rapidly.

Read the full report

CBA’s Global Economic and Markets Research team publishes a wide range of economic and financial research each week covering the latest data, trends, policy developments and topical issues in Australia and other major economies. To access these publications please visit the GEMR website.

Our Economic Expert

Stephen Wu is an economist at the Commonwealth Bank and joined from the Reserve Bank of Australia. He has more than three years of experience as an economist covering both the Australian and global economies. He holds a Bachelor of Commerce in Economics (Honours) and Finance and Bachelor of Arts degree from the University of Sydney.