From our Chris today:
It is hard to imagine a more insanely stupid and economically irrational decision than South Australia’s big bank double-tax, which is likely illegal, has no policy basis whatsoever, and could end up generating zero net revenue even if it’s implemented.
…After the no less asinine Western Australian treasurer blurted out that he might emulate this bank burglary (the major states have sensibly ruled it out), I had a call from an investor overseas who alleged that our policy process looked like it was being pulled from Greece’s playbook.
Another London-based trader warned “the wonder down under is resembling a ‘banana republic’ again given the constant political change (is yet another prime minister going to be knifed?), your reliance on commodity exports, and the political propensity to rip-off your best businesses”.
Recall that it is the commonwealth government, not South Australia, that guarantees the big banks’ retail deposits free of charge, and implicitly guarantees their senior bonds and wholesale deposits, which the Reserve Bank of Australia estimates reduces their cost of funding by 0.2 per cent to 0.4 per cent annually.
…Adelaide cannot claim any of these bases to rationalise its own annual tax, which is legally unconstitutional, practically a form of theft, and could paradoxically result in negative net revenue.
Most bizarrely, if the major banks and Macquarie decided they no longer want to do business in the state—and why would they when they have been so savagely discriminated against—they would still have to pay the tax even though they have no deposits and/or loans in the region. And pity the poor South Australian business that wants a large loan from the majors right now—it is questionable whether it will secure credit approval until this mess is resolved.
All true. And?
This is a Banana Republic where only Banana Republic policy process has any chance of implementing change at all.
The sooner foreign investors realise it and price our risk appropriately the sooner the Banana Republic will be replaced by a functional political economy.
Bravo SA.
