The Reserve Bank of Australia takes greater stock in less volatile quarterly figures but the consumer price index for May will provide a valuable insight into inflation's direction of travel when released by the Australian Bureau of Statistics on Wednesday.
After inflation came in higher than expected at 2.4 per cent in April, economists at ANZ are expecting the headline figure to ease to 2.3 per cent off the back of falling petrol prices.
But conflict in the Middle East has sent crude oil soaring in recent days, so a reversal in prices is likely to come in the following months.
From $US60 a barrel in May, some analysts have predicted oil could soar past the $US100 a barrel mark if the conflict between Israel and Iran spirals, with strikes on oil infrastructure and disruption to supply chains.
That would have a widespread impact on Australian prices, given oil flows through to input costs, either directly via production or indirectly via distribution, for pretty much the entire economy.
But ANZ commodities analysts Daniel Hynes and Soni Kumari think the $US100 a barrel scenario is unlikely.
The most likely outcome (they assign about a 50 per cent chance) is for crude prices to reach $US75-85 a barrel, despite an extended conflict.
"This would see supplies come under direct threat," the analysts said.
"However, the oil market is better equipped to respond to that than it has been in the past.Â
"(Oil exporting organisation) OPEC has over six million barrels per day of spare capacity that can be quickly activated."
The Reserve Bank will likely look through the noise of volatile oil prices and focus on the underlying pace in the trimmed mean.
On Tuesday, Australia's largest and third-largest regional economies, NSW and Queensland, will unveil the state of their finances.
Together, the two account for about 20 per cent of all government expenditure in Australia and are increasingly contributing to mounting public debt.
This has real consequences for the macro economy and the Reserve Bank's monetary policy strategy, e61 Institute economists Michael Brennan and Aaron Wong said.
"State and territory finances are drifting onto an unsustainable path," they said.
"Before the pandemic, state budgets were broadly balanced. This year, the states will run a collective cash deficit close to 2.0 per cent of GDP - bigger than the federal deficit, thus more than half the nation's total government sector deficit."
NSW Treasurer Daniel Mookhey has conceded the state's remaining AAA credit ratings with agencies Fitch and Moody's are under threat amid the ongoing deficit.
This would make borrowing costs more expensive and further constrain the state's spending capacity.
The ACT will also reveal its budget on Tuesday, with its finances expected to remain in deficit.
In his February budget update, Treasurer Chris Steel revealed the territory's projected deficit swelled by more than 50 per cent to $970 million from the previous update just seven months earlier.
Wall Street investors were meanwhile on edge over the Iran-Israel conflict heading into the weekend, as the US considers whether to get involved.
Trading was choppy for much of Friday, with the S&P 500 losing 12.53 points, or 0.21 per cent, to end at 5,968.34 points, while the Nasdaq Composite lost 95.27 points, or 0.49 per cent, to 19,451.01.
The Dow Jones Industrial Average rose 38.47 points, or 0.09 per cent, to 42,210.13.
Australian share futures fell 20 points, or 0.23 per cent, to 7,812.
The S&P/ASX200 fell 18.2 points, or 0.21 per cent, to 8,505.5, as the broader All Ordinaries lost 17.9 points, or 0.2 per cent, to 8,723.5.
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