There is much speculation that consumers will bear the cost of the Turnbull Government’s ‘surprise’ 0.6 per cent tax on Australia’s big banks, with the banks threatening to band together to fight the measure.
The measure is expected to raise $6.2 billion over four years but, it seems, no one is sure exactly how this will occur.
A meeting between banking representatives and Treasury officials in Canberra this week has done little to clear up this uncertainty, with government representatives unable to answer a range of questions about how the proposed tax will work.
“The Government’s attack on the major banks is now fraught with even more uncertainty after bank representatives left a meeting with Treasury officials this morning with more questions than answers,” said Australian Bankers’ Association CEO Anna Bligh.
“For example, they were not able to explain how they had reached the $6.2 billion estimate of revenue from this proposed tax. They were unable to answer a range of very important and very complex questions. It seems that not only were banks kept in the dark on this tax, but perhaps Treasury officials have been kept in the dark up until now.
“There is no doubt that this policy was rushed into the budget at the last minute as a smash-and-grab for money to fill a hole. What is even clearer today is that many of the policy parameters are still uncertain, basic question cannot be answered.
“Banks left the meeting today unable to make any determination about which parts of their banking activities would be subject to the tax, and they are therefore unable to yet determine what it will mean financially for each bank.
“This is emerging as a shambles for the Government. The government has clearly not taken into account the very complex issues that surround the mechanisms of banking every single day in this country.”
Banks have warned that extra costs imposed upon them will be passed onto their customers.
Commonwealth Bank Chief Executive Ian Narev stated that “every extra cost needs to be borne by customers or shareholders, or a combination of both”.
But Treasurer Scott Morrison said he will ask the Australian Competition and Consumer Commission to monitor any unfair cost increases to customers.
“We’re getting the competition watchdog to ensure that the banks don’t lie to Australians about any costs they impose on their customers,” he said.
ANZ CEO Shayne Elliott called the proposal a “regrettable policy”, saying the measure will end up being a “tax on the millions of ordinary Australians who are bank shareholders and bank customers”.
“The cost of any new tax is ultimately borne by shareholders, borrowers, depositors and employees,” claimed Westpac CEO Brian Hartzer.
However, Mr Morrison says it is a “fair tax that will help us deliver the important services that Australians rely on”.
“I’d also make the point that the levy doesn’t apply to the smaller and regional banks so I encourage Australians to shop around if they’re not getting a competitive mortgage rate from the big banks,” he added.
Consumer group CHOICE says that the banks’ reaction is “juvenile” and has called on them not to pass on the extra tax to consumers, or the banks may face a mutiny.
“If you are with one of the big five banks and they punish you by passing on the levy, your best option is to ditch them for one of the 135 other deposit taking institutions in Australia,” said CHOICE CEO Alan Kirkland.
“The banking industry’s juvenile reaction to this levy speaks volumes about these very powerful and profitable companies that are completely out of touch. It also points to a genuine lack of competitive pressure in this highly concentrated market.”
“From punishing mortgage holders with out of cycle rate hikes, to outrageously high credit card interest rates, to the financial advice and insurance scandals that have left consumers out of pocket, the banks have destroyed the public trust and confidence that they once enjoyed.
“One challenge for consumers looking to switch is making sure that you aren’t with a sub-brand or product still connected with a big bank. The big banks hide behind brands like Financial Wisdom, Bank of Melbourne and white-label home loans so you could be with a big institution and not even realise it,” Mr Kirkland says.
CHOICE has also released a ‘cheat sheet’ that exposes the sub brands associated with big banks.
The reality is, it is not such an easy task to switch banks – especially when you’re paying off a mortgage. Still, if the banks are unwilling to support long-time customers, the only way they’ll ‘get the message’ is for a mass mutiny.
Would you switch banks if they pass on the cost of the levy to you? Do you think the banks have a right to be upset?