(Image: AAP/Deam Lewins)

The June quarter Consumer Price Index data is out tomorrow. Market forecasts are for a quarter-on-quarter rise of 0.5% (compared to 0.4% in the March quarter) for an annual rise of between 2% and 2.2%, with the underlying figures of 0.5%/1.9% annual unchanged. Those sort of numbers would be exactly what the Reserve Bank expects; as it said in the minutes of its July board meeting, “progress towards a lower unemployment rate and an inflation rate closer to the midpoint of the target range was likely to be gradual”`. But if there’s a bigger rise than expected, watch the monetary policy galahs at the Financial Review and in academia renew their campaign for a rise in interest rates — or, as the Reserve Bank recently implied, “instability”.

Last week’s June Labour Force numbers confirmed that, despite the large jump in seasonally adjusted terms in new jobs (50,900 and 27,000 in trend terms), the strong employment growth of 2017 is well behind us. The trend growth in jobs in 2017 was an annual 3.3%, but by June it had slowed to an annual rate of 2.0% — which is now the average for the past 20 years. In the six months to June, 123,800 jobs compared to 207,000 in the first six months of 2017, and sharply slower than the rate that gave us 406,600 jobs (on a trend basis) in all of 2017.

Those are still good jobs numbers — but unlikely to be sufficient to really drive the unemployment rate down or lift wages growth. As the NAB’s Chief Economist Alan Oster noted in the bank’s quarterly survey of business conditions and confidence “wages growth is likely to remain broadly similar over the rest of 2018 as in the first half. So while our baseline is for the labour market to tighten and wages growth to pick-up, there is an emerging risk of slowing employment growth and lower resulting wage growth acceleration.”

Over at AMP, Shane Oliver has a similar view

We remain of the view that with mixed readings on economic growth, low wages growth and inflation and falling home prices in Sydney and Melbourne an RBA rate hike is unlikely until 2020 at the earliest, and that the next move being a cut cannot be ruled out … With jobs growth not cutting much into the 13.9% pool of unemployed and underemployed workers its hard to see wages growth picking up much any time soon … Solid jobs growth is providing a source of support for total household income in the economy and hence consumer spending, but its being offset by ongoing soft wages growth and along with falling home prices the outlook for consumer spending is likely to remain constrained.

It’s a frustrating period for everyone. The galahs want a tightening of monetary policy that the RBA won’t give. The RBA wants to see wages growth and inflation pick up before it moves. The government wants voters to be grateful for the strong jobs growth it has presided over. Businesses want households to spend more but they’ve cut their savings to the bone. And it’s frustrating most of all for workers, who keep being told how wonderful everything is when most of them are going backwards in their real pay.