It is crunch time for monetary policy in Australia with the data flow between now and the 5 August meeting of the RBA Board to largely determine whether it will cut interest rates or not.

This Thursday, the labour force data are published and another weak month for job creation (note employment is up a tiny 5,500 in the last two months) and / or a tick back up in the unemployment rate towards 6 per cent would suggest the nice spurt to economic growth and jobs in the March quarter was more a blip than a trend.

On 23 July, the June quarter inflation data are released and after a low reading for the March quarter, a further gain of around 0.5 per cent would be hinting strongly that inflation is likely to ease back to within the 2 to 3 per cent band by the end of 2014. The outlook for lower inflation is enhanced by the still strong Australian dollar and the fact that wages growth is meandering at record low levels. Softer economic growth is also a disinflationary factor.

But before the RBA Board sits down to its iced vovos and early grey tea next month, it will also have the next run of data on building approvals and retail trade, both of which have been trending down in the last few months. Indeed, the retail trade data are so disconcerting that when the ABS release the June data, on the day before the August RBA meeting, that real growth in retail spending will be down for the quarter.

It is probably too much to think the RBA will be cutting interest rates in August but the dovish statement after last week’s Board meeting, plus the run of comments from Governor Glenn Stevens suggests rate cuts could well be on the table, especially with a couple of soft data results over the next few weeks.