The National Australia Bank (NAB) analysts present a brief preview of what to expect from this week’s wages and employment data slated for release from Australia.

Key Quotes:

“The two most significant pieces of data being Q3 Wages on Wednesday and Employment on Thursday.

These two pieces will be important for the outlook for monetary policy with the RBA clearly wanting to see evidence of a reduction in spare capacity and a lift in wages growth before they can be confident that inflation will lift towards the 2-3% target band.

The WPI on Wednesday will be closely watched to see whether subdued wages growth has bottomed in Australia. This quarter the market expects wages to increase 0.7% q/q and 2.2% y/y, boosted by the increase in the minimum wage which was hiked 3.3% on July 1.

Although NAB's forecast is similar, our forecast is on the straddle of the 0.6/0.7% divide and we accordingly think the risks could be slightly to the downside of the market consensus.

Our analysis of prior minimum wage increases suggests the minimum wage could add an extra 0.1% to wages growth on top of the Q2 0.5% outcome, slightly softer than the market and the RBA's estimate of a 0.2% boost.”