Treasurer acknowledges he cannot guarantee banks won’t pass on the $6.2bn tax in budget to customers

This article is more than 3 years old

This article is more than 3 years old

Scott Morrison has acknowledged the big banks will find any way to charge customers and said he accepts responsibility for all the budget measures, including the $6.2bn bank tax.

Continuing his attacks on the big banks, the treasurer pointed to previous instances when banks had increased interest rates even when cash rates had not been increased.

“I accept the responsibility for all steps we have taken in the budget,” Morrison told the ABC’s Insiders program.

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When asked if he could guarantee banks would not pass on the $6.2bn tax to customers, Morrison acknowledged the banks could pass it on.

“In the same way that banks have put up interest rates, even when there hasn’t been a move in the Reserve Bank cash rate,” he said. “I mean, banks will find any way they can to charge their customers more with fees and charges.”

Morrison said the tax on the big five banks of 0.06% on liabilities represented only six basis points, compared with the Reserve Bank cash rate changes of 25 basis points.

“To suggest this is somehow the end of financial civilisation as we know it is one of the biggest overreaches in a whinge about a tax I’ve ever seen,” Morrison said.

The bank tax was one of the big surprises of Tuesday’s budget, after Tony Abbott’s government rejected a 0.05% tax on deposits announced by Labor in its last 2013 budget but not implemented.

The Labor deposits tax was recommended by the Council of Financial Regulators following the Rudd government guarantee given to the big banks during the global financial crisis, which saw huge capital flows from smaller banks into the big banks, consolidating their hold and decreasing competition further in the sector.

Labor argued the deposits tax was a premium on the government’s insurance of the system against possible bank failure, a guarantee that does not extend to smaller banks and credit unions.

On Sunday, Morrison also argued that the Turnbull government’s tax acknowledged the advantage of major banks over smaller banks.

“Let’s not forget that our major banks have about a 20-40 basis point advantage because of the nature of the regulation and structure of our financial system,” Morrison said.

“What we have done here is structured a levy which isn’t on pensioners’ bank accounts, which is what the Labor party’s bank tax was on.

“We have structured it on their liabilities which doesn’t include deposit accounts, doesn’t include their regulatory capital in tier one, doesn’t include shareholders’ capital. That’s a fair tax and a well-structured tax.”

Morrison characterised the bank tax as a pro-productivity measure designed to help smaller banks and said if the big banks pass on the tax, customers could choose a smaller bank.

“I can tell you the regional banks are very happy about this because, for once, a government has heard what they’ve been saying to us – ‘You’ve got to level the playing for us here,’” Morrison said.

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“They’ve got good products, good customers, they are very community-focused. I think they are doing good things to ensure banking customers have more choices.”

Labor has committed to support the permanent bank tax but rejected the suggestion the Turnbull government tax was about competition.

“It is certainly true the big banks find it easier to access cheaper capital than the smaller banks and credit unions – that is true and, to some degree, that is a differential approach,” the shadow treasurer, Chris Bowen, told Sky. “But I don’t think a levy actually increases competition.”

Bowen said the fact that the government had only just sought a review on the issue through the Productivity Commission – two years after it was recommended in the Murray financial system review – proved that it was a last-minute decision.

Morrison also defended the government’s 0.5% rise in the Medicare levy while removing the temporary deficit levy on high-income earners. Labor supports the Medicare levy rise but Bill Shorten said it should only apply to people earning more than $87,000.

“We have kept our promise that [the deficit levy] will come off,” Morrison said. “That is a completely different issue from our decision two years later to put in place an increase in the Medicare levy of half a per cent and that means that the less you earn, the less you pay.”

Morrison said the Medicare levy rise would be paid by people earning just over $20,000, however some families will not pay until $40,000.