Australia’s five biggest banks are stepping up their campaign against a levy that the government plans to introduce on July 1, which will collectively add nearly A$1bn (US$745m) to their costs annually.
The proposed imposition of a 0.06% levy on some liabilities of the country’s ‘big five’ – high street banks Commonwealth Bank of Australia (CBA), Westpac, National Australia Bank (NAB), Australia and New Zealand Banking Group (ANZ) and investment bank Macquarie – was announced in the federal budget on May 8, to raise revenue needed to close the country’s deficit.
The government said that the levy would deliver A$6.2bn over the next four years as part of measures that aims to return the federal budget to a surplus by 2020-21. The estimated annual impact is A$220m for CBA, A$240m for ANZ, A$245m for NAB and A$260m for Westpac.
CBA said it had expressed serious concerns that the levy was a poorly designed policy whose impact would extend customers and shareholders. Westpac called the tax “inefficient”, NAB said that it could not be absorbed and threatened profitability, while ANZ claimed the levy could affect its ability to maintain dividend payments at current levels.
Westpac added that if the government went ahead with its plans, the levy should also be applied to foreign banks to ensure it was not competitively disadvantaged. It also called for a “sunset” clause to be included in the legislation so the levy is abolished when the budget returns to surplus in 2021.
Australia’s prime minister, Malcolm Turnbull, has responded that the country’s big banks hold an advantage over their smaller rivals and the levy should make the sector more competitive. “If this levy does level the playing field, then this would be a good outcome for consumers and for borrowers generally,” he said.
Scott Morrison, the government treasurer and a senior member of Turnbull’s cabinet and expenditure review committee, said earlier this month that the levy “reflects the way major banks are treated all around the world” and would be fairer to small lenders that do not benefit from implicit government guarantees.
“We think this is absolutely something that the banks should absorb, must absorb or, frankly, they’re treating their customers like mugs,” he added.
Australia’s major banks are all well capitalised and highly profitable. Industry players and analysts have suggested that the levy could encourage banks to change their funding strategy such as beefing up securitisation as a way to minimise the overall cost, as pooled or securitised debt can be taken off bank balance sheets and funded in the capital market.
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