ABC’s 7.30 Report last night ran a segment on the announced 0.06% levy on the big 5 banks’ liabilities, which featured some sensible commentary from The Australia Institute’s chief economist, Richard Denniss:
“They might succeed in running a campaign. I doubt they’ll succeed in winning it…
To some extent, we are late to the party. I mean the UK and Europe have been pursuing these kinds of levies for quite some time now. Clearly their systems are still operating and clearly their economies are still functioning…
The fact that the Government stands behind them is part of their marketing advantage. There is no doubt that customers see them as safer and, in turn, many customers accept lower interest rates on their deposits or pay higher interest rates on their loans because of the perceived safety of the big banks…
$1.2 billion a year is a drop in the ocean for the banks. Indeed, it is about what they spend on advertising, the cost of which was passed on to their customers. Of course, the numbers seem large but, compared to the size of the banks, this is small beer”…
As well as sensible commentary from Bendigo Bank CEO, Mike Hirst:
“The Reserve Bank were asked to estimate the benefit of that implied guarantee and they estimated that benefit for the major banks at about $3.8 billion a year. So, they’ve been asked to give back $6.2 billion over a four year period which is about $1.55 billion a year. They’re still ahead each year to the tune of somewhere like $2.3 billion”.
But more shameless rent-seeking from former Treasury Secretary, turned NAB Chairman, Ken Henry:
Ken Henry: “…any tax is borne by individuals, ultimately borne by people. In this case, the bank levy, it will be borne by a combination of shareholders and bank customers principally and it will have a negative impact on economic growth, on business investment, on borrowing, perhaps on the level of saving as well.
…in my view, the tax is bad policy. It’s a policy which is reminiscent of the sorts of taxes that we had in Australia before the big tax reform started in 1983 and, certainly, when the GST was introduced.
All taxes of this sort were abolished. This tax is very similar to duties that were legislated in Australia in 1982. You have to go that far back to find a tax similar to this. So it’s bad policy but, on top of that, the process has been a bad process.
Leigh Sales: You said in your first answer this would have a negative impact on economic growth. But the Government is taking that money and using it partly to finance spending on infrastructure projects. Are they not drivers of economic growth?
Ken Henry: Sure. If that’s what the Government is doing, if it’s recirculating the revenue in order to finance growth but, actually, it hasn’t been put that way at all. It’s been articulated as a means of reducing the size of the budget deficit. Not to finance additional spending…
Leigh Sales: Bank levy aside, and just looking at the budget more broadly in your capacity as the former Treasury Secretary. Do you think it is going to achieve its stated aims of reducing the deficit, getting spending under control and so forth?
Ken Henry: The Government maintains that it has a fiscal strategy of achieving balance, on average, over the cycle. It is most likely, on my reading of the budget papers, that we’ll be very lucky if there is even one surplus, one surplus in one year achieved over this current economic cycle.
That means that future generations of Australians are going to have to be left with the task of repaying the debt and that was not the objective of the fiscal consolidation strategies of either the Hawke Government or the Howard Government…
That debt has to be repaid and, of course, at some stage, and at some stage that does mean higher taxes. In what form and when, of course, we don’t know.
Maybe it will be years before Australians find out but at some stage there will have to be a fiscal consolidation and when that fiscal consolidation occurs, it could be quite dramatic and, in the interim, people will have reason to be worried about the form of that fiscal consolidation.
Anyone else see the blatant contradictions in Henry’s reasoning?
In the one breath he bemoans the bank levy because it will be used to lower the Budget deficit and, therefore, will lower economic growth.
Then in the next breath he bemoans the Budget deficit, claiming that future generations will pay and taxes will ultimately need to rise!
So what is it Ken? Is lowering the Budget deficit good or bad? Or is it only good if taxes are increased on anyone but the banks?
Your shameless rent-seeking on behalf of the banks is a disgrace. You used to have a good policy brain, but sadly have turned into a corporate sell-out.
