Anna Bligh, the CEO of the Australian Bankers Association reacts to the bank levy, and whether this will be passed onto consumers
Introduction Bank Levy
Ross Greenwood: I want to play you something from our coverage last night. Our extended coverage of the federal budget. That was a little exchange that I had with the treasurer Scott Morrison in regards to the tax on banks, $6,000,000,000 it is the key area the government is going to raise new revenue from this budget. Here’s what he said.
Scott Morrison: Frankly the banks can do their bit for budget repair.
Ross Greenwood: They’re a soft target aren’t they?
Scott: They are a group that are in a position to help Australia’s budget. We’re asking them to do that rather than hit mums and dads. The only people who’ll be extra paying taxes from the 1st of July this year will be the large banks, only the big five, not regional banks. This levels the playing field up a bit for those regional and smaller banks.
Interview with Anna Bligh, CEO Australian Bankers Association
Ross Greenwood: Let’s go to what some of the chief executives of those banks said today in statements. Brian Hartzer from Westpac, the chief executive “There is no magic pudding. The cost of any new tax is ultimately borne by shareholders, borrowers, depositors, and employees.” Ian Narev from the Commonwealth Bank “As everyone business owner or employee knows, every extra cost needs to be borne by customers or shareholders, or a combination of both.”
The chief executive of the National Australia Bank Andrew Thorburn said “A tax cannot be absorbed. This tax is borne by these people.” He talked about 10,000,000 net customers, 507,000 direct shareholders. Also, 1700 suppliers to NAB. It is not possible to impose a tax without an impact of people and therefore the wider community. But I’ve got to say the government, and also today the treasurer, were not for bending.
They said this is going to come in. Let’s try and find out exactly how the banking industry will face this. The chief executive of the Australian Bankers’ Association is Anna Bligh. Many thanks for your time Anna.
Anna Bligh: Good evening Ross Greenwood. How are you?
Ross Greenwood: Good thank you. How will the banks fight this potential new tax?
Anna Bligh: One of the problems with this new tax and the way that it’s been announced Ross Greenwood is that right now banks still know very very little about it. There was no consultation. There are still very few details in the public arena. That will be remedied tomorrow when FIN representatives of banks will meet with senior treasury officials to get a very full briefing.
Until banks can really get a handle on what’s included in the tax and what’s not, it’s very hard for them to crunch the numbers and get a better understanding of what it means for them and their bank.
Ross Greenwood: Government makes the observation now Anna Bligh that the banks make $30,000,000,000 a year, plus. That the impost of $6,000,000,000 over four years, $1,500,000,000. If we work it out maybe $300,000,000 each on an annual basis over that period of time. Is it really that much to ask the banks to make a contribution?
Anna Bligh: Let me say a couple of things. Firstly, $1,500,000,000 in anybody’s language is a lot of money. You take it out of —
Ross Greenwood: So is $30,000,000,000 for that matter, Anna Bligh, as well.
Anna Bligh: Absolutely. I’ll come to profit, don’t worry. But you take $1,500,000,000 out of the economy, which is where it is. With banks, it’s actually out there going into dividends and people spending that money in their local community, in local businesses. You take that out of the economy, put it into government coffers. It’s going to have an effect. We shouldn’t kid ourselves about that.
Secondly, do banks make a very big whole big profit? Yes, they do. We need them to do that. We want our banking system to be one of the strongest in the world. It’s what protects us as customers, and keeps our economy moving. But banks are not the only companies in this country that are making very strong and healthy profits. In fact, there are a number of companies that have much higher returns on equity than the banks do.
Those companies, in my view. The decision to single out banks is a very dangerous precedent by the government. That somewhere down the track a number of other businesses should be thinking about who’s next.
Mining Tax vs Bank Tax
Ross Greenwood: Okay well there you go. You understand. You’re a former state premier. You understand that oil and gas revenue — Oil and gas companies have a petroleum resource tax on them. They’ve got a special tax on them. There are state royalties that go onto coal miners and to iron minors as well. There are different taxes on individual industries. They are already singled out. If the banks have an additional tax on them is there any real difference between what happens with them and other industries?
Anna Bligh: I’d be very careful comparing mining and banking. Mining companies you’re right, do have both tax obligations and royalty obligations. The royalty obligation, which is another form of taxation. But it is there to recognize that the resources they profit from belong to Australians. When it comes to banks, as I said, yes they make a profit. But they have in this case without any policy rationale, and without economic policy wrapped around it, been singled out.
For what I think will be seen as a very punitive taxation treatment. Partly because the government believes that politically they’re an easy target. This is bad policy. This over time will have implications that I don’t think anybody can yet understand.
Ross Greenwood: Hang on. One thing Anna. If you’ve raised the tax. Can I just ask you one question? If the taxes are raised, and well I’ve just given you the statements from the chief executives and they pass on that tax to customers, or through stakeholders, or whatever it might be. It really doesn’t touch the bank all that much because they’ll get the revenue you back. You’ve obviously got members that are large banks and small banks.
The smaller banks actually get a bonus, we could see it with their share prices rising today. The Bendigo Bank and also The Bank of Queensland. I mean so they’ve risen rather strongly on the prospect that they might get some business from the big banks. Is that necessarily such a bad thing?
Smash and grab
Anna Bligh: Let me firstly address the issue you say isn’t it reasonable that banks should contribute to budget repair? If this was part of a well thought through, comprehensive economic package about budget repair, then I think banks would feel more comfortable about being part of, and playing their part. But this is not about a serious economic theory that underpins a budget repair strategy. This is a smash and grab.
This is smashing open the window of the jewellery shop and taking the jewels because they’re valuable. In this case, the jewels belong to the Australian people, belongs to those people who deposit their money in banks, who borrow money from banks, who invest in banks as mom and dad shareholders. You shouldn’t play around with this as a political football in too caviler fashion.
Ross Greenwood: You’re saying that Scott Morrison’s a bank robber effectively. Is that what you’re saying here? The jewellery shop analogy wasn’t a bad one. It took me to that point.
Anna Bligh: Look I do think that’s how the banks feel today. I should say to you Ross Greenwood, they’re very angry. Banks understand that they’ve got a number of issues to deal with in terms of winning back customer trust and public respect. I think they need to be given credit for the extraordinary amount of work they have done in the last 12 months. Cooperating with government, 17 government inquiries, reviews, investigations. Sorry 15 government ones and two industry ones.
Unprecedented level of scrutiny in the history of banking in this country. Leading to an unprecedented level of reform that will deliver better service, better culture, and better conduct for customers. But taxing banks? It does nothing for customers. Taxing banks is not about proving the things that matter to people in the community like bank culture and bank conduct. I think it is very important that we conduct this debate. I was very disturbed by some of the language being used.
It’s become very fashionable, and very populist to bash banks. Our finance system in this country is the envy of many in the world. It underpins the strength of our economy and the well-being of every family.
Ross Greenwood: Anna Bligh is the chief executive of the Australian Bankers Association. Anna, as always we appreciate your time here on the program.
Anna Bligh: Thank you very much, Ross Greenwood.
Ross Greenwood: We’ll take your calls on that one as well. 131873.