The major bank levy will be another tax hit on all Australians, according to new research by the Centre for Independent Studies (CIS).
“The bank levy will most likely result in higher mortgage rates; effectively another tax on Australian households — who are already being afflicted by flatlining real wages and ongoing increases in personal tax,” CIS economist Michael Potter said.
“The levy will also likely mean higher business interest rates, dampening business investment which is already at near-record lows.”
The CIS research report, The Major Bank Levy: We’re all going to be hit, released today, examines the significant problems with the bank levy.
Access research summary Snapshot
Access full research report
“Contrary to the government’s arguments, the levy won’t have a material impact on the expected budget surplus,” Mr Potter said.
“The link between the levy and supposed unfair advantages of the big banks is particularly flimsy — and it would be better to remove any supposed advantages directly.
“If the levy is meant to help competition, it immediately compromises a separate Productivity Commission inquiry into this issue. If the government doesn’t want to compromise the inquiry, it must abandon the levy if the Commission doesn’t support it.
“Despite claims to the contrary, the levy won’t bring Australia into alignment with other developed countries, as many do not have a levy similar to Australia’s proposed one.
“The levy also breaches multiple regulation guidelines, and increases systemic or regulatory risk.
“Finally, the levy will harm financial stability by discouraging better forms of bank funding and encouraging funding with higher taxpayer risk. If the levy makes the banks appear ‘Too Big To Fail’, this increases financial systemic risks.
“The wisest course would be for the levy to be abandoned. If not it should be delayed so that a comprehensive review can be conducted,” Mr Potter said.
Michael Potter is a Research Fellow in the Economics Program at the Centre for Independent Studies and author of the CIS research report The Major Bank Levy: We’re all going to be hit.
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