Don’t bank on that $6b
THE Turnbull Government is relying on “unrealistic” economic growth rates to ensure its controversial bank tax reaps $6.2 billion over four years, the big banks say.
And the Government could be forced to hike the rate of the levy if it wants to reach its desired tax take, according to a leading banking analyst.
Challenged over bank estimates that the new levy would raise far less than forecast, the Government yesterday said it was counting on an expansion in credit to boost the tax base.
On Monday, Westpac, ANZ, National Australia Bank and the Commonwealth Bank forecast a combined outlay for the tax of less than $1 billion in the first year – a far cry from the $1.55 billion the Government wants to raise each year.
While the remaining lender subject to the tax, Macquarie Bank, is yet to forecast its outlay, it is expected to fork out less than any of the Big Four.
The overall shortfall is expected to be about $2 billion over the four-year forward estimates period.
Industry sources yesterday said the shortfall suggested the Treasury’s forecasts were wrong.
The Government was relying on strong growth among the banks when the main source of momentum in the industry, the housing market, appeared to be slowing, they said.
“Australian banks can only grow as fast as the economy,” one insider said. “We have had a turbocharged housing boom – this is clearly slowing, and everyone has been predicting an uptick in business lending since Adam was a boy.”
In its Budget unveiled on May 9, the Government said banks would have to pay a levy of 0.06 per cent a year on their liabilities, starting from July 1.
But Treasury was yet to produce figures showing a breakdown of how the tax would be applied, another source said.
Banks had requested this information during the initial “shambolic” meeting between executives and Treasury officials two days after the Budget was handed down, the source said.
Deutsche Bank analyst Andrew Triggs agreed that the aggregate amount to be collected by the Government was likely to fall short of the $6.2 billion targeted in the Budget over four years.
Mr Triggs said the Government could be forced to look at tweaking the tax to reach its goal.
“We see a risk that the sixbasis-point levy could be lifted,” he said in a note for investors.
The banks are waiting to see if the Government will release a draft of the bank tax Bill – which would have to be delivered late this week – before it is presented to Parliament by the middle of next week.
Prime Minister Malcolm Turnbull this week said the tax was needed to help plug the Budget deficit and ensure Australia kept its triple-A credit rating.
In a series of statements to the stockmarket on Monday, Westpac, the Commonwealth Bank, National Australia Bank and ANZ all forecast hits ranging from $220 million to $260 million. Combined, they are expecting a damage bill of $965 million a year.