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.
