For the full details, download the full report: Australian Markets Weekly 3 September 2018

• The market ended August with international trade and tariff unease still the watchword, and the AUD below 0.72, having traded at its lowest level since December 2016.  Canada and the US were unable to reach a deal this past Friday on NAFTA.  Talks are restarting this Wednesday.
• Also in the background for markets is the consultation period on additional US tariffs on $200bn of Chinese imports that ends this Thursday.  Emerging market frailties are another market headwind for the AUD in an environment of continuing support for the US dollar.
• It’s a huge week ahead for local economists, Q2 GDP on Wednesday the focus, NAB (& the market) looking for 0.7% q/q/2.8% y/y. The RBA expects 0.9% q/q. Today’s Company Profits & Inventories tilted the growth risk for GDP back toward if not a little above the 0.7% mark, growth supports after last week’s softer than expected Q2 Capex survey.  There is more to come with Q2 Net Exports & Government spending out tomorrow.
• For tomorrow’s RBA Board meeting, no change in policy is again universally expected, the market rating the chance of a rate change as a firm 0.0%. Tomorrow’s post-meeting Media Release is unlikely to ruffle the market’s feathers, but Governor Lowe’s post-Board dinner address will no doubt draw attention to the unfolding upturn in the mining and resources sector, also the topic of this Weekly!
• Offshore, trade and tariffs are back in the spotlight with potential US tariffs of 25% on another $200bn of Chinese goods kicking in as early as this week.  Depending on any escalation of tensions and volatility, the market may be able to return its attention to the state of the global economy.
• A menu of cornerstone US releases starts tomorrow night with the US ISM Manufacturing report, expected to be still solid at 57.6.  Book-ending the week is Friday’s payrolls, focussing on what is still expected to be strong momentum in the labour market with the consensus looking for an uptick in average hourly earnings growth from 0.2% to 0.3%, for unchanged annual growth of 2.7%.
• In this Weekly, we dig a little deeper into the revival in resources sector activity in WA, where, for some jobs, labour shortages are already appearing in Mining as well as in Oil and Gas with salaries rising again and some sizeably.
• Our main takeaways from this “dig” are three fold.  First, there is no doubt that the Mining/Resources sector is continuing to grow, momentum evident now for the best part of a year.  Second, the recruitment has been directed to increase spending and staffing levels to bolster existing operations.  Third, salaries on offer for jobs in the North West have not only risen but are within sight of previous highs and that’s even before recently-announced new development projects are yet to be rolled out. With such growth ahead, salary pressures are likely to rise further.

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