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Government must put a floor under the bank levy

The Australian Greens Treasury spokesperson, Senator Peter Whish-Wilson, today called on the government to guarantee that the bank levy will meet budgeted forecasts for revenue.

Senator Whish-Wilson said, “The big four banks have all been briefed on the bank levy and have all estimated that it will bring in less than what the government has budgeted for.

“In total, the big four estimate they will pay close to $1 billion per annum or $4 billion over the forward estimates. The government has budgeted $6.2 billion over the forward estimates. Macquarie Bank will not go close to accounting for this shortfall.

“This is in accord with analysis done by my office that suggests the government has not properly accounted for the tax deductibility of the bank levy.

“The government must put a floor under the bank levy to ensure that it meets revenue targets. The government should be prepared to increase the rate of the levy so that the big banks pay their fair share.

“The proposed levy rate of six basis points is well short of the estimated 20 basis point discount on wholesale funding that the big-four get for being too-big-to-fail.

“Standard & Poors (S&P) confirmed yesterday that their credit ratings for the big-four reflect their expectation of ‘timely financial support from the Australian government, if needed’ and that this ‘offsets the deterioration in these bank’s [stand-alone credit profiles]’.

“In contrast, S&P downgraded second-tier banks that not implicitly guaranteed by the government. This underscores the importance of a properly priced levy on the big four to help improve competition in Australia’s highly concentrated banking sector. Unless the levy on the big four is substantial they will continue to crowd out and likely take over smaller banks.

“The government also needs to bring forward work on account portability, including giving customers the option of being able to transport their account number from one bank to another. This will make it easier for customers to respond to any moves by the big four to push the costs of the levy onto them rather than shareholders.

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