Jobs data is expected to show ongoing resilience in Australia's labour market but renewed conflict in the Middle East could bring more bad news for the domestic economy.
The unemployment rate is expected to hold steady at 4.4 per cent in June labour force figures due for released by the Australian Bureau of Statistics on Thursday.
After a surprisingly-strong 40,000 jobs were added to the economy in May, Citi economists Josh Williamson and Faraz Syed project employment growth to slow to 20,000.
But with the participation rate holding at 66.7 per cent, they believe the unemployment rate could decline to 4.3 per cent (4.36 per cent to 4.34 per cent unrounded).
ANZ economist Aaron Luk said it would only take a small decline in the number of unemployed to take the rounded figure down to 4.3 per cent, even though his base case forecast was for the rate to hold steady.
"This is broadly consistent with signals from labour demand indicators, with ANZ-Indeed Australian Job Ads broadly unchanged over the month (-0.2 per cent month-on-month) and the NAB employment index easing slightly," he said.
Early evidence suggested the labour market was starting to soften, said NAB chief economist Sally Auld.
"So we do have the unemployment rate drifting higher over the course of the back half of this year and into into next year," she told a media briefing.
Any optimism from Australia's robust jobs market could be undone by the re-escalation of the US-Iran conflict.
Oil prices have rebounded since the most recent closure of the Strait of Hormuz and reports Iran could direct the Yemen-based Houthis to close the Red Sea oil route if US strikes escalate, threaten even greater disruption to energy supplies.
For the Reserve Bank, any resumption in the Middle East conflict was likely to be viewed as an upside risk to inflation, said economists at ANZ.
"While we expect the cash rate will remain at 4.35 per cent, we do not rule out ongoing price pressures pushing the RBA to a November rate hike, assuming the August meeting sees 'no change' from the board," they wrote in a research note.
Dr Auld said she expected the benchmark Brent crude oil price - currently around $US85 a barrel - to bounce around a range of $US70 to $US90.
"At the bottom of that range, which is where we were at the beginning of the month, maybe the Iranians have a bit of incentive to escalate and misbehave a little bit," she said.
"And at the top of that range, maybe the US has more of an incentive to want to de-escalate a little bit."
If prices started to move higher out of that range though, we go back to a scenario where it's the worst of both outcomes for the RBA, Dr Auld said.
"Not only do we have to worry about higher inflation and inflation expectations, we also have to worry about more of a hit to real incomes."
A potential slowdown in the artificial intelligence boom, rather than the Iran war, has meanwhile caught the eye of Wall Street investors.
The Dow Jones fell 406.55 points, or 0.77 per cent on Friday, to 52,146.42, the S&P 500 lost 76.08 points, or 1.01 per cent, to 7,457.69 and the Nasdaq 361.70 points, or 1.40 per cent, to 25,520.24.
Australian share futures climbed 54 points, or 0.61 per cent, to 12,055.
The S&P/ASX200 fell 44 points on Friday, down 0.5 per cent, to 8,796.7, while the broader All Ordinaries lost 58.1 points, or 0.64 per cent, to 8,978.8.
