Big 4 banks stock 784x495

Investors finished the financial year well ahead of workers, with the ASX 200 gaining 8.3% over 2017-18. When dividends are included, the ASX 200 was up more than 13%. That compares to wage growth of 2.1% in the year to March, and it’s not likely to climb too much beyond that for the year to June.

Workers will benefit from the ASX via their superannuation accounts — if they’re in industry or corporate funds, rather than underperforming retail funds — but it provides an ironic counterpoint to the silly argument advanced by the government and the business lobby that companies will start paying higher wages if company tax cuts give them a windfall.

Despite all the gloom about the impact of the royal commission, it was the big banks who saved the day for investors. While the big four are all down over the year, they all came home with a wet sail in June, suggesting investors figure the worst is over from the royal commission and any likely regulatory consequences aren’t going to crimp future profits too much.

The CBA’s shares fell 12% overall in 2017-18, but they rose 6% in the month of June. Westpac shares fell a total of 4% over the financial year, but jumped 5.6% in June. NAB shares lost 7.3% in value over the year, but rose 2.8% in June. ANZ shares were down just 1.67% over the financial year and rose 5.3% in June. Bank of Bendigo and Adelaide, a big regional, saw a 10% plus rise in the June quarter and 3.4% in June. Macquarie Group shares jumped nearly 40% in the financial year, 20% in the June quarter and 9.6% in June in a standout performance for the sector.

[Inflation hawks having a good screech at the Fin]

And in case you’re wondering if there are any members of the commentariat who still don’t get it when it comes to wages growth, check out the latest shriek from an inflation hawk in the Financial Review. Former ANZ economist Warren Hogan called for an interest rate rise: “This means getting on with the task of monetary policy normalisation even if it comes at some cost in terms of growth and employment”. That is, tightening monetary policy even if it lowers growth and increases unemployment. 

Quite apart from the spectacle of yet another middle-aged white male economist (in no danger of losing his job) calling for interest rate hikes regardless of the impact on regular people, higher unemployment would further undermine wages growth, which is already near record lows. The strong jobs growth we had last year wasn’t enough to shift the dial on wages growth — what would a rise in unemployment induced by a Reserve Bank deciding to lift rates “just because” do to growth?

Plenty of workers are already going backwards in terms of real wages. Do inflation hawks even care?