The Centre for Independent Studies has released its Research Report titled The Major Bank Levy: We’re all going to be hit analysing the impact of this legislative measure on the Australian economy, businesses and consumers.
The 2017 – 18 Budget proposed (which has now been passed and due to start from 1 July 2017) a levy on Australian banks with total liabilities over $100 billion which was satisfied by Commonwealth, ANZ, Westpac, NAB and Macquarie. The report finds that the bank levy is likely to result in higher mortgage and business lending rates due to the indirect flow on effects. The report cites numerous academics such as Professor John Freebairn from Melbourne University and Richard Holden from UNSW who assert that the levy will predominantly be passed onto household mortgages.
The report emphasises that the government’s comparison with other countries are flawed due to the differing contexts and infrastructure of the banking system. An example is the contrast between the United Kingdom where the private banks required expensive ‘bailouts’ while the Australian banking system did not necessitate this.
A further concern raised in the report is the public process during the development of the levy that resulted in it being introduced in a rushed timeframe without any public consultation with the community. The usual steps in place for such significant proposal with widespread implications on consumers, businesses and the financial system ought to have undergone a consultation process that attempted to understand the community’s concerns regarding draft proposals and the opportunity for submissions to respond. Ultimately, an industry that has two months to comply with a substantial levy or tax should not have less than 2 months to be given notice.
Though the report advocates for the levy to be abandoned or to be postponed for a year to prepare, after this release the government has now passed the legislation and the Australian economy, businesses and consumers shall now brace itself for impact. For further analysis and assessment of the bank levy, see the full report here.
Brendon Zhu is a Research Associate at the Australian Taxpayers' Alliance.