Give us a break, David Murray

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I have watched David Murray’s post CBA public service career with a mix of trepidation, anger and admiration. He has by and large made sense and there has not been any great need to point out that he was very much a responsible party in the giant millennium offshore funding ramp-up that quietly undermined Australia’s banking architecture, installed massive moral hazard into the system and attached the majors in particular to a public balance sheet umbilical that exists to this day.

But if he is going to comment on the new bank levy, his past becomes pertinent to the discussion point. From the AFR:

Former Commonwealth Bank of Australia chief David Murray has equated a planned levy on bank deposits to the goods and services tax, saying it would have an economy-wide hit.

“Any tax you put on the banking system, because the banking system is the financial intermediary to the whole economy, it’s the same as putting a tax on the whole economy,” Mr Murray told The Australian Financial Review.

…“One of the unfortunate consequences of bank bashing, which I know has been a very popular pastime in Australia, is that politically the focus is on doing something with banks and that prevents a proper analysis of what this tax or levy, or whatever it’s called, would actually do to the system.”

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With due respect, this is not a tax. It’s not a GST. It’s a deposit insurance fee. It is very far from bank bashing and has become necessary because David Murray and his successors borrowed too much money offshore and to stabilise the liabilities in the system deposit guarantees became necessary. Should it be provided gratis? Obviously not.

Will it hit growth? In some small way, maybe. But $350-700 million across the entire banking system is chicken feed, really. If the timing is not perfect, well, it’s still a small step in the right direction.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.