Australian shares got off to a weak start on Tuesday as the political rhetoric over North Korea’s nuclear bomb testing continued to build, with the US threatening to end trade with any country that deals with the rogue state – namely China.
Australian Trade Minister Steven Ciobo said it would be in no one’s interest if a global trade war broke out.
“The implications would be the world would go into recession, that we would see thousands of jobs lost,” Ciobo told Sky News.
The latest ANZ-Roy Morgan consumer confidence index edged up 0.5 per cent in the past week, building on a 3.9 per cent rise in the previous week amid growing optimism over the performance of the Australian economy.
ANZ senior economist Felicity Emmett agrees the economy has improved during the June quarter after a slow start to the year.
“Business conditions and confidence remain elevated and appear to be translating into stronger business spending, but weak wage growth is dampening consumer sentiment,” she said.
This is likely to weigh on household spending over the medium term and act as a constraint on a further the acceleration in economic growth.
Figures on Monday showed while wages grew at their fastest pace in two years in the June quarter, the annual pace still lagged the rate of inflation.
The June quarter national accounts are due on Wednesday.
At this stage forecasts centre on an economic growth increase of around 0.7 per cent for the quarter, which would keep the annual rate at 1.7 per cent.
This would be a pickup from the puny 0.3 per cent result in the first three months of the year.
Economists will finalise their forecasts later on Tuesday after international trade and government spending numbers are released.
The Reserve Bank is likely to have been encouraged by the recent spate of largely upbeat economic indicators but not by enough to start lifting interest rates just yet.
Economists widely expect the central bank board will leave the cash rate at a record-low 1.5 per cent when its board meets later on Tuesday.
Financial markets are factoring in a 50/50 chance of a rate rise by May next year.
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