Surplus seeker and slow follower on bank taxes, Scott Morrison
A hefty rise or even a widening in the levy on banks’ liabilities may yet be a hot chance for next week’s budget. And definitely following any change in government in May.
The ALP and Bill Shorten won’t fuss, and Labor more than likely plans to collect much, much more than the current government would impose on a harried industry.
Prime minister Scott Morrison yesterday “confirmed treasurer Josh Frydenberg will next week announce the nation’s first budget surplus” since 2006, and said this will be “driven by lowest level of spending growth in more than 50 years.” Or so The Australian reports. For this morning's chief "drop" on the budget, there's this outline in the Oz, mostly on the spending spend.
Guesswork on a surplus, the first since the mid 2000s, has floated around for months, and while “the sheer determination and will to get expenditure under control,” as Morrison put it, is one way to go about reaching a magic political number, the pessimistic economic backdrop ensures that spending cuts must be limited, and any budget surplus or the one that follows will include increased taxes as part of the mix.
That was the budget then PM Malcolm Turnbull engineered to be jammed with a host of other whacks at banking. Morrison was the treasurer with the brief to bash and tax the industry, yielding little to the carry-on that followed.
Projected to produce A$9 billion over five years at the 2018 budget, the most recent data shows bank tax collections have missed these targets over the first two years. Plugging this hole is only the beginnings of any rationale to ramp up the levy.
A material rise in the tax will, if confined to the five banks paying it now, present an easy scenario for a government rolling out plenty more budget measures with Ken Hayne's royal commission stamp on them.
More radically, some form of widening of the tax base to cover many more local and foreign banks, and at the extreme a direct tax on each and every dollar of household deposits, these options are in the zone. Taxes along these lines were announced by one recent Labor treasurer, discarded and almost re-announced by the replacement treasurer from the Liberal party. With extensive support on the public service side of discussions in Canberra, a much wider bank tax must become part of the industry fabric eventually.
There’s plenty more pros than cons and any needy government has solid backup if they have resorted to this extra bank tax.
The Productivity Commission called for a wider levy last year, bank taxes on most deposits (those benefiting from the deposit guarantee) and, at a firm level, ensuring that all banks pay for the implied support (in the form of cheaper access to debt markets) that applies to most of the industry. There's been plenty of bank lobbying for clearer (implied to be higher) taxes, from organisations pretty big and very small in banking.
Labor’s Chris Bowen, when briefly treasurer in 2013, announced a five basis point levy on a broad base deposis; that's the main precedent. And Labor has to be way more determined on the revenue side in its alternative budget, it will be needed either during the election or as ballast when Bill Shorten makes his reply to Frydenberg next Thursday.
If Bowen stuck to something like the tax he he wanted levied with effect from 2016, there’s really only their mates from the credit union side of banking and more aggro foreign banks to pacify.
In his 2013 version, the levy was to apply to "all protected deposits", bringing bank taxes back from the dead as routine on bank statements, 1990s style.
So far the most Bowen and ALP leader Bill Shorten have said on this topic, 3 weeks after Hayne's final report in February, was to more or less casually ask banks to pay more into the budget
, almost as if these were donations.
Labor’s leaders have promised spending on consumer financial measures, funded by this vague revenue source. And those outlined are all small fry outlays, amounting to around no more than a tenth of the current annual take from the bank levy.
There has to be far more than that to keep Labor in front foot, bollocking banks often as the election looms.
Thus Labor, this is speculation drawing on history, will let loose with a policy demanding a sizeable hike in taxes on the banks, perhaps tiered to make sure its big banks seen to be paying the biggest share of the overall increase.
The modern news cycle might cough up details in short order, from either side, if we're getting things right.
Any bank tax hike won’t attract anything like the banking industry’s insincere protests of 2017.
The main problem is that this time the likes of the ACCC and smaller banks (if a bank tax falls on some mutuals) will concur that the tax can and will be “passed on” to the public.
The big banks and the ABA are in no position to put on a political stink after the royal commission and in any event Labor’s present, modest proposals for increased bank taxes are already an accepted fact in the countdown to the election. No reason to stop there.