No, the banks aren’t really scared
By Ross Hamilton
A lot of Australians are fed up with the big banks. While constantly trying to convince us via television ads how lovely they really are, they are busy ripping billions in profits away from us via fees. That is in addition to many millions in government handouts and protections in the last decade alone. This latest Budget has attempted to get hold of some of those excessive profits for the national good – not by something like an excessive profits tax, but by instituting a new special levy. But will it mean anything in the long run? Nope.
The attitude of Malcolm Turnbull towards the banks as a politician have been quite distinctive. As Leader of the Opposition, when the banks bowed to public pressure and passed on more of an interest rate cut than they had been doing of late, Turnbull declared this was because the banks feared his Opposition. They had ‘drawn a line in the sand,’ he declared, that the banks were too afraid to cross. I was driving on a freeway when that gem appeared on the radio in 2008 and I had to pull over into the emergency lane as I simply could not believe what I was hearing.
Malcolm Turnbull then became PM but the refrain continued. He had the measure of the big banks. And his solution to public concerns was to declare that the banks now had to attend an annual hearing before a Senate Committee to explain themselves. And the banks were apparently terrified of it. Their CEOs were hiding under their desks, piddling their pants. Take for example an appearance by the CEO of the Commonwealth Bank. In the wake of some scandals, the CBA had commissioned an external review of their systems and practices to see what was wrong.
So, asked the Senate Committee, “What did that review find was wrong?
Wrong? Oh it didn’t find anything wrong? No, no, no…all is just fine and dandy.
What? What did your clients have to say to the review? flustered the SC.
Clients? What clients?
You know, all those unhappy people who were making complaints.
Oh them. The review didn’t talk to any of them. Why bother? Everything was shown to be just fine so they didn’t need to talk to anyone.
You cads! shrieked the SC. You scoundrels! You rotters!
Yeah, whatever, replied Mr CBA CEO. Talk to the hand, dudes and dudettes.”
Now we can all relax. Everything is now just going to be just fine. A new levy is to be imposed on the Big Four, expected to raise $6.2 billion over the next four years. All that money is going to pour into the public coffers and is to be used for all manner of wonderful things.
Hooray. That is the big banks all pulled into line by the 2017 Budget. All is now wonderful in the world!
Sorry – time for a reality check.
What happens when a business incurs an additional cost of conducting business? Does it meekly absorb that cost and reduce its profitability or does it pass that cost onto the consumer? No questions about that one folks, it all goes to Column B. And the banks shall not be any different. Over the next four years, everyone who is a client of one of the big four or even dares to use one of their services such as an ATM, can confidently expect to be forking out more fees to cover that levy. And businesses shall pass on their share of those bank fees on to their clients. And so on.
Or am I being too pessimistic? Treasurer Scott Morrison has, after all, had some stern words for the banks. Not in Parliament where it might have meant something, but in a post-Budget speech at the National Press Club, Morrison told the banks he would be disappointed if they did pass on that cost to their customers.
Well then, that should take care of that. Don’t forget – the banks are all scared of Malcolm Turnbull and his government. Petrified. At least that is what he would have us believe, despite evidence to the contrary.
Of course, the big banks are going to recover every single damned cent of that new levy. Not in any single item that could be easily highlighted in their financial statements and subjected to more Senate scolding, but in free increases here, there and everywhere. And that will flow on from their business clients to everyone else.
Guess what, people, that levy on the banks is going to end up being one thing and one thing only – we have all been indirectly hit with a new tax which is going to cost us $6.2 billion over the next four years. All for the sake of some populist poll points.
This article was originally published on Ross’s Rant.
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Turns out that levy is tax deductible.
Can the banks charge their customers the pre-tax amount of the levy?
Yes, the banks are ‘bad’ but in the whole scheme of things they are but minnows. At least, they pay some tax. Others don’t. Or at least do so in only minimal, symbolic amounts. Here’s a few dots.
Where was Turnbull? Where was his ‘perspective’? Where was his condemnation’?
Makes the $165 million appropriated by some individuals seem like small change. Not that it has escaped attention. Whereas the banks might be too big to fail, many multinationals are too big to expose. Perhaps some perspective is in order?
Not excusing the behaviour of big 5 Australian banks by the way.
Catch this – the banks increase investor loan interest rates to recoup some or all of the newly introduced bank levy. These investors by grace of the negative gearing, claim this as a tax deduction on their income – thereby costing the government tax revenue and now it’s revealed that the bank levy is tax deductible for the banks.
The recent increases in interest charges on investor loans has already had this effect on bank profits with their increased charges coming at the expense to Govt. revenue due to negative gearing.
This is starting to look like either a win or at the worst a zero sum game for the banks…
Now I’d love to see the coalition pursue the Multinationals with some gusto or perhaps anyd sign of enthusiasm whatsoever, maybe just send in two angry boy scouts…
“Their influence and reach has metastasized to the point where we now live under a captive system. From our retirement accounts, to our homes, to the laws we live under — the banks control it all. And they run the system for their benefit, not ours.”
“It should come as little surprise that, with all this advantage they’ve amassed, the banks have enriched themselves and their cronies spectacularly. They have made themselves too big to fail, and too big to jail. Remember that their reckless greed caused the 2008 financial crisis, and yet, in 2009, not only did bankers avoid criminal prosecutions, not only did the banks receive hundreds of billions in government bailouts, but they paid themselves record bonuses?”
We also need to talk about how vulnerable we are as we adopt this cashless economy. Something as simple as a power outage and you may not be able to access any money. This recently happened to me when I was out of town and had no cash in my pocket; couldn’t even buy a cup of coffee for 24 hours. The banks hold our money and all financial records for many of us as well. You really cannot close your bank account, as most of us receive our income / wage / pension etc directly into a bank account. About all you can do is to start withdrawing all your money and keeping it elsewhere (as you might as well do, since you get no interest to speak of). Now many utilities are starting to charge for paper bills and the pressure is on to just let them access your account and take your money as they see fit.
Anyone who has read Margaret Attwood’s ‘A Handmaid’s Tale’ can see how much power the banking system holds
isn’t a “levy” tax deductable, so it will be the taxpayers paying, and the customers and the shareholders
I cannot understand why Australians are so wedded to the big four Banks. For many years I have used the local credit union, now re badged as a bank. Full banking service, low fees, delightful people. Mortgages no problem with very reasonable interest rates.
There are lots of credit unions, building societies and regional banks.
Especially now that fewer people can afford to buy property and have no mortgage to transfer, the switch away from the big four should be a no brainer.
The only shareholders are the customers.
No dividends to pay means low fees and although they have to pay slightly more than the big boys for funds to lend, their lending rates are comparable or lower.
Vote with your feet folks.