Greens senator, Peter Whish-Wilson, gave an excellent extended interview on ABC’s The Business last night (extract above), whereby he made a strong case for the bank levy to be raised from its current proposed level of 0.06%:
“The most important issue is that we get a good levy in place so that it raises billions of dollars so that it can help pay for schools and hospitals…
In the UK, they had to raise their bank levy at least three times to get the revenue they required, so I don’t think the Treasurer should be ruling it out. And I don’t think the Labor Party should be out there saying that the Treasurer should rule-out a higher rate.
This is about raising revenue from wealthy banks that make billions of dollars of profit. If we don’t take money from them, then we’ll end up taking money from poorer Australians..,.
The policy justification for this levy is simple. Since the GFC, we’ve had both explicit and implicit guarantees put in place that have given the Big Four banks a competitive advantage. In a sense, it has been an insurance policy for the banks funded by the government, by the taxpayer. We are asking the big banks to now to pay that back. They need to pay a premium if they want that insurance policy – if they want the taxpayer to bail them out should things go astray. We know that’s around 20 basis points to 40 basis points, based on the best information. I don’t think anybody’s disputing that they have a discount – they are deemed lower risk in wholesale funding because of this – they’ve benefited to the tune of billions of dollars, we want to see that paid back”…
Very well said, especially the last paragraph.
Chris Joye last week estimated that the big banks receive more than $5 billion in subsidies from taxpayers every year:
According to RBA research in 2015, the “major banks have received an unexplained funding advantage over smaller Australian banks of around 20 to 40 basis points on average since 2000″…
The RBA’s 20 to 40 basis point estimate of the too-big-to-fail funding advantage implies that the majors capture an annual taxpayer subsidy worth more than $5 billion from their implicit government guarantee (using the wholesale liabilities identified in the budget).
This makes the majors by far the most publicly subsidised companies in the country…
Whereas Bendigo Bank CEO, Mike Hirst, made similar comments last week:
“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”.
The bank levy is efficient because it will help internalise part of the cost of the Government’s support of the banks.
If anything, the levy should be tripled to better cover the cost of support provided on behalf of taxpayers to the banks.
