Cat meet pigeons:
Australia’s big four banks plus Macquarie will be hit with a new state-based version of the major bank levy which will reap $370 million over the next four years for the South Australia Government as it ramps up spending on infrastructure in a struggling economy.
South Australian Treasurer Tom Koutsantonis said the banks were fair game for the states as well as the federal government. He has imposed a new South Australian major bank levy equal to the state’s share of liabilities which are subject to the federal major bank levy.
“Even if every other state follows they’d still be under-taxed,” Mr Koutsantonis said of the banks.
The levy will apply at a rate of 0.015 per cent of South Australia’s share of liabilities. It is projected to raise $97 million in 2017-18 and will begin on July 1, 2017. It is calculated on a formula revolving around the state’s share of national gross domestic product, which is currently about 6 per cent.
SA Premier Jay Weatherill said he was the one who would personally telephone Anna Bligh, the chief executive of the Australian Bankers Association at the conclusion of the budget lock-up in Adelaide on Thursday.
It’s conniption time! While there really isn’t much justification for SA to do it, it is true that the banks remain very under-taxed. The big banks enjoy an estimated 20bps to 40bps funding advantage because of the government guarantee, according to the RBA, which is effectively a $5 billion annual taxpayer subsidy provided to the banks. The smaller banks, and indeed foreign banks, are not considered to be government guaranteed, which is why the big banks receive a three notch ratings upgrade on their smaller rivals.
If the real cost of the guarantees is 18 basis points then SA taking 1.5bps is 8% of the recouped freebie. With 6% of the population SA has added a little premium. But who’s counting?
As for Fake Premier Blight, no bonus this year…
