ECONOMISTS this week watched the economy gradually accelerating and wondered how the Reserve Bank of Australia would respond.
The first surprise for economists was on Wednesday, with a report that retail trade barely grew in March.
But economists mostly brushed off the hint of a slower trend in retail spending.
"While retail sales softened in March, the broader picture is suggesting that retail spending has undergone a gradual recovery since mid-2013, helping support economic growth," St George Bank economist Janu Chan said.
"Continued economic recovery this year is likely to prompt the Reserve Bank to raise interest rates later this year," she said.
NAB economist Spiros Papadopoulos said that growth, although slower, was still positive.
"Nevertheless, lower consumer confidence (which could take another hit this month given the negative press surrounding the Budget) combined with weak wages growth suggests we should see some softening in retail sales levels in coming months," he said.
The retail figures were followed on Thursday by news of a moderate 14,200 rise in employment and employment steady at 5.8 per cent, both a bit better than most economists had forecast.
Royal Bank of Canada economist Su-Lin Ong said the firm labour market report would encourage debate about whether the jobless rate has peaked.
"Given the importance of the labour market in the policy debate, these developments continue to suggest that the market may be a little complacent over just how long the cash rate will remain at an historically low 2.50 per cent," she said.
UBS economists Scott Haslem and George Tharenou said the figures confirmed an improving trend in the labour market.
"Of course, the bias in jobs toward part-time over full-time, is likely in part consistent with a still hesitant underlying economy and only modest household income growth.
"Together with the recent sharp weakening in consumer confidence - and some likely fiscal drag (from the upcoming budget) ahead - the better trend in jobs will be comforting, rather than concerning, for the RBA," Haslem and Tharenou said.
Still, some looked squarely on the bright side for the economy, like HSBC's Paul Bloxham, commenting on the RBA's quarterly monetary policy statement on Friday.
"A key focus was on the labour market, which has been improving more quickly than the RBA had expected in the last official statement," he said.
He said this may prompt the RBA to raise interest rates unexpectedly early.
Commonwealth Bank economists Diana Mousina and Gareth Aird said the RBA expects the unemployment rate to start trending downwards only after mid-2015, when economic growth returns to trend.
"In our view, the risk is that the unemployment rate peaks sooner and a lower level than what the RBA's forecasts suggest," they said.
But ANZ chief economist Ivan Colhoun said the RBA's jobs outlook implied quite a "dovish" (that is, not expecting increases) view on interest rates, given the importance of unemployment trends in driving monetary policy historically.
"If realised this could delay the beginning of rate hikes until later in 2015 as the market has recently been moving to price," Mr Colhoun said.
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