Australian banks slugged with $4.6B levy
CANBERRA — Australia’s biggest banks face a new tax, tougher penalties for misdeeds and efforts to spur competition as Prime Minister Malcolm Turnbull taps voter resentment against the lenders to finance infrastructure and health spending.
The government will raise A$6.2 billion ($4.6 billion) from the nation’s five biggest banks over the next four years by imposing a six basis points levy on liabilities over A$100 billion, Treasurer Scott Morrison said in the budget. It won’t apply to superannuation funds or insurance companies.
“This represents an additional and fair contribution from our major banks, is similar to measures imposed in other advanced countries, and will even up the playing field for smaller banks,” Morrison said in his budget speech.
Shares of the nation’s big four banks fell after news of the levy leaked earlier in the day.
Commonwealth Bank of Australia slumped 3.9 per cent, the biggest decline in 15 months, at the close of trading in Sydney. Westpac Banking Corp dropped 3.5 per
This represents an additional and fair contribution from our major banks, is similar to measures imposed in other advanced countries, and will even up the playing field for smaller banks Scott Morrison, Government Treasurer
cent, Australia & New Zealand Banking Group Ltd shares fell 2.6 per cent and National Australia Bank declined 2.1 per cent.
The tax will force banks to either take a blow to their profitability or pass the charges on to customers in the form of lower deposit rates and higher borrowing costs.
“Banks need to explain what they do to their customers, and customers can go elsewhere,” Morrison told Bloomberg Television. “If they want to put up their prices, that’s a matter for them.”
The Australian Bankers’ Association slammed the tax, and blasted the government for failing to consult lenders before announcing the plan.
‘Tax grab’
“This new tax is not a well thought out policy response to a public interest issue, it is a political tax grab to cover a budget black hole,” the association’s CEO Anna Bligh said. “It is naive and misguided and has already sent the wrong signals to global financial markets about the strength and stability of our banking sector.”
The levy is equal to about five per cent of banking sector profits, UBS Group analysts led by Jonathan Mott said in a note before the levy was announced.
“The Australian banks have a very good record of passing on higher funding costs” to customers, Mott said. The easiest way to do so would be to raise mortgage rates by between 12 basis points to 15 basis points.
The new levy from the traditionally business-friendly coalition aims to appeal to indebted voters’ anger at banks, which have failed to pass on interestrate cuts in full even as they posted record profits. — Bloomberg