Morrison’s bank levy shows some serious steel
Executives have also been warned that their bonuses are at risk
It was French King Louis XIV’s finance minister, Jean-Baptiste Colbert, who famously said that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”.
Judging by the hissing from top executives of the major Aussie banks, Liberal Treasurer Scott Morrison — who unveiled the latest Australian Budget on Tuesday evening — doesn’t give a toss for Colbert’s lesson.
He’s set an objective to raise as much revenue as possible through making a moral point that banks should make a bigger contribution to fund the Budget on behalf of all Australians.
The bankers are not buying it. But predictably, an Australian populace which has seen younger people priced out of the housing market and farmers driven off their land via mortgagee sales — all at a time when bank CEO salaries have hit stratospheric heights — doesn’t need much encouragement to buy into the “bankers are bastards” motif that the Treasurer is mining. Particularly when there has been a run of banking scandals including allegations of interest rate rigging which brought mea culpas all round in a parliamentary inquiry.
From July 1, banks with liabilities over A$100 billion — including the four major banks which also dominate the NZ banking market — will be hit up with a levy of 0.06 per cent on those liabilities.
“They make A$30 billion in profits and this is just A$1.5 billion (every year for four) out of that,” Morrison said.
And for good measure, bank executives have been warned their bonuses could be at risk if they are found to deliberately rip off their customers. The Australian Prudential Regulation Authority — which regulates institutions — will be given new powers to change remuneration policies, ban executives and impose penalties of up to A$200 million for misconduct. At least 60 per cent of chief executive bonuses and 40 per cent of other senior executives’ bonuses may also be deferred for a minimum of four years.
Inevitably there will be considerable brinksmanship with banking CEOs now arguing the “tax” will have to be recovered somehow.
It is hard to see a New Zealand finance minister or treasurer (outside of a Winston Peters) slapping major Aussie banks with a new tax, let alone a A$6b one. Or — as the Australian reported — having a verbal whack at them during his Budget lockup, as Morrison did, by retorting “Cry me a River” when asked if the financial institutions might be unhappy with the new impost.
Morrison’s set an objective to raise as much revenue as possible through making a moral point that banks should make a bigger contribution to fund the Budget on behalf of all Australians.
Morrison’s Budget recipe also includes a small “tax” hike (via the Medicare levy), a spend-up on infrastructure fuelled by what the Treasurer labels “good debt”, new levies to sting bosses hiring foreign workers who will have to pay into a “Skilling Australians Fund” and the university fee hikes which have resulted in New Zealand students put on the same higher fee rate as other “foreign” students.
Morrison — dubbed “Scomo” by journalists and his own Facebook signature — is one ballsy character.
He has worked on this side of the Tasman. He headed up the then Office of Tourism and Sport when National’s Murray McCully was Tourism Minister in the late 1990s. Labour subsequently labelled him “McCully’s hard man”.
But he also professes to be a fan of the economic reform pace set by John Key and Bill English during three terms of National Government.
Last year Morrison talked about the challenge the Liberal Coalition faced not only getting its books in order but moving to once again post Budget surpluses and arrest Government debt.
His Budget introduces the concept of “good debt” (that which funds infrastructure and economic growth. And by inference “bad debt” which funds welfare.
“This distinction should prove useful in shifting the debt-is-evil mindset and allowing a sensible debate on how to fund the day-to-day running costs of government and longer-term infrastructure needs,” noted CBA. “The shift to highlighting the ‘new’ fiscal measure of the net operating balance alongside the traditional underlying and headline deficits is part of this shift. The net operating balance is the balance between revenue and recurrent expenses. It excludes expenditure on the acquisition of capital assets ie public capex. It matches the budget presentations used by the States (and Canada and New Zealand). We have argued [for] such a split for a while.”
Some would simply label it pork-barrelling.
But it is notable that Morrison has muted much of the political opposition in Australia by essentially playing from Labor’s playbook.