The Australia Institute welcomes the opportunity to a submission to the Inquiry into the Major Bank Levy Bill 2017 and the Treasury Laws Amendment (Major Bank Levy) Bill 2017. This submission should be read in conjunction with some earlier submissions to Senate Inquiries. In particular we refer to our submission to the Senate Economics Committee inquiries ‘Competition within the Australian banking sector’ and ‘Consumer protection in the banking, insurance and financial sector’. Those submissions will be forwarded to the Committee Secretariat.
The government aims to introduce a bank levy to raise $6.2 billion over the forward estimates. The levy itself is 0.06 per cent on banks with total liabilities of $100 billion or more. But those liabilities will exclude among other things deposits less than $250,000. By excluding those liabilities the government may be signalling that it does not expect to see the levy passed on through fees on customer deposits under $250,000.
The levy will apply to five big banks – Westpac, ANZ, Commonwealth Bank, National Australia Bank, and Macquarie Group. There is a good case for taxing the rents or super profits extracted by the big banks. Before tax underlying profits of the big four alone amounted to $46.1 billion in the four quarters to September 2016. That amounts to almost three cents in every dollar spent in Australia. Not only do the big banks dominate a concentrated banking sector but they have a common ownership which tends to nullify any tendency for genuine competition. In addition they have shown a willingness to dupe customers with strategies such as pretending St George is an independent business through to the various scandals that have come forward recently.
Australian Banking Association CEO Anna Bligh has vowed that ‘every Australian is going to have to pay the bill’ for the new levy. Her promise of revenge goes to prove that the Australian big banks have too much economic and political power. We can only hope the government empowers the ACCC to respond effectively to Bligh’s revenge. The ABS household expenditure survey shows that low income groups pay higher proportions of their incomes in bank fees.