Money in the bank
Townsville THERE was a strong view in the press gallery on Federal Budget night that the $ 6 billion bank tax was “all about Anna”.
The rational version was that the appointment of former Queensland Labor premier Anna Bligh as the banking sector’s official lobbyist had so enraged Treasurer Scott Morrison – and his body language at the time left little doubt on that score – that it had tipped the balance.
The banks were well and truly on the political nose.
They were the richest piece of real estate in the corporate sector.
You could even justify extracting a payment to the public purse, for the public purse’s commitment to always bail them out.
Billions of dollars were needed to balance the budget. Roughly one half of that was going to come from a tax that would hurt politically – the boosting of the Medicare levy.
Why not get the other half from a source that might even win you political brownie points. And after Anna nobody was going to go in to bat for the nasty big banks.
The less rational version is simpler: after Anna, Morrison was determined to get the banks.
Now, either version could be validated by his response to the banks being upset: “Cry me a river.”
But frankly, the less rational ver- sion is clearly absurd. You don’t have to look for a conspiracy or blind anger to explain, if not justify, the move.
The motivation was simple: taxing the banks offered – seemed to offer – a uniquely painless way of raising a lot of revenue.
I wrote $ 6 billion at the top of the column. No, that’s just the first $ 6 billion, over the next four years.
This tax is more forever than herpes. They might one day find a cure for that, the bank tax once imposed will never, repeat never, be repealed.
And it will be imposed almost unanimously in both houses. Cory Bernardi and David Leyonhjelm are the only certain no votes, in the Senate. The Greens will probably be calling for it to be doubled.
The broad reason it is forever is the rather depressing one: no Australian government in our lifetime is going to be in a position to consider tax cuts.
But even in the extraordinary event that some future government finds itself with a budget actually in the black, cutting the tax on big banks and their multi- billion- dollar profits is going to rank last in the scheme of things or even lower.
Apart from anything else, in the cynical oeuvre of tax “goose- plucking”, a settled tax is a good tax. And by then – at best, some time well after 2025 at the earliest – the bank tax will be well and truly baked into bank liability and asset pricing, along with whatever has happened to bank profitability.
The tax was one thing, the Government going even more heavyhanded on banks with the threat of fines up to $ 200 million, presumably per event, deteriorated into the crudest bank- bashing.
The Government thought it had to – and was cleverly – heading off the Opposition at one pass with the tax. It clearly thought it had to head it off at another ( royal commission) pass with this “Banking Executive Accountability Regime’’ giving us the acronym, ha- ha, BEAR.
But really, $ 200 million fines? That resonates of US- style overkill, like 937- year sentences – maybe appropriate back when Methuselah was a lad – or five life sentences, say, to be served consecutively.
It does raise the interesting prospect of a future hairy- chested APRA applying multiple $ 200 million penalties and then the Government, or indeed, that very same APRA, having to bail out said bank by sending the money back!
Detail of the levy remains well, let’s call it, “unexplored”. Hardly surprising, when the banks weren’t consulted.
It appears that it will be tax deductible. So does that mean the levy will actually raise closer to $ 9 billion in those first four years, with $ 3 billion or so coming back to the banks in reduced company tax, to get the net budget plus of $ 6.2 billion?
And how do the numbers play out as the banks adjust their liability/ asset pricing to claw back the $ 6.2 billion? Or do they aim for $ 9 billion?
Rather incoherently, the Treasurer is justifying the levy on the basis of the government guarantee, yet precisely those deposits ( of less than $ 250,000) which ARE guaranteed will be excluded from the calculation of the levy.
So, does that mean the Treasurer actually believes that these deposits will therefore be insulated from the impact of the levy? Or is it just all about the political optics; that voters – sorry, depositors – would hopefully believe they were being insulated?
Indeed, if they were to be so favourably treated, it would mean that either borrowers would pay double or providers of wholesale finance would. Except, they can’t – the banks have to pay wholesale investors what the global market demands.
Unfortunately, there was more than a bit of this sort of incoherence, which announced – no, positively, screamed – is the Government seriously saying that if the Medicare money runs out at the end of May in a financial year, nobody can get healthcare in the last month of June?
Of course not: it’s all just rather pointless political signalling.
The Government embracing higher taxes, higher spending and continued deficits is bad enough. The crude politics overlay makes it worse.