This must be a new record for the speed of a tax hike. On Monday 19 June, the federal parliament passed legislation implementing the major bank levy. And yesterday — just four days later —the South Australian government announced it would slap its own additional levy on the same banks.
The federal government promised the levy wasn’t going to increase. But that promise didn’t last long… perhaps another record.
Who knows where this will end, with the South Australian government suggesting other states should follow suit. Perhaps they are looking to the example of the United Kingdom — their equivalent levy increased nine times.
We were assured the federal government’s bank levy was ‘small’ and would have a negligible economic impact. That assurance doesn’t look like it is going to last long either.
Meanwhile, the actual impact of the levy will be an increase in mortgage interest rates. Australian experts think so, as does the international evidence. The banks aren’t going to absorb the levy, despite what the federal treasurer says.
The bank levy will become another tax increase on Australian households, when we are already facing record low growth in real wages and ongoing increases in personal tax — particularly through bracket creep.
There are many other problems with the levy. It isn’t essential to maintaining Australia’s credit rating; it will likely reduce bank resilience, despite the government’s arguments; it won’t align Australia with other developed countries; and it won’t offset supposedly ‘unfair’ big bank advantages.
Perhaps the levy is setting another record — the record for the amount of dissembling, trickery and obfuscation contained in one policy.
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.