SA folds on bank levy

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By Leith van Onselen

Just in via The Australian:

The South Australian government has abandoned its controversial bank tax.

Premier Jay Weatherill says the levy, designed to raise $360 million from the big banks over the next four years, has no prospect of being passed in state parliament.

“For all intents and purposes, the bank tax is dead,” Mr Weatherill told reporters on Wednesday.

The premier indicated the government would not take the tax to the next election in March and would not seek to reintroduce it should his government be returned.

The tax was opposed by the banks, the business community and the South Australian opposition, with the Australian Bankers’ Association waging an intense media campaign.

They all claimed the tax would deter investment in SA, an argument the government rejected.

Sadly, the banking parasites win again and they will continue being subsidised to the tune of billions by the taxpayer. The correct pricing for public support is 18 basis points on bank liabilities. Today it is 6 basis points, thanks to the federal levy. So there are 12 basis points of subsidy still going into private hands for profit at the public’s risk.

As for the claim that SA’s bank levy would have deterred investment, what baloney. It was a carbon copy of the Turnbull Government’s package, only reduced in size (to 0.0036 per cent or 0.36 basis points) to reflect South Australia’s share of the national economy.

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It would have had zero impact on lending or investment in South Australia and ergo economic growth, since it is levied on the Big Four banks and Macquarie’s total liabilities, not those pertaining to just South Australia. Hence, the banks would be unable to dodge the levy by avoiding South Australia.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.