Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

There is a little bit of a pattern here. Today, the parliament is dealing with a number of matters where the opposition has tried to give the government bipartisan support, yet the government is bungling the implementation as we go. In the other place we are dealing with the GST threshold issue and in this place now we are dealing with the major bank levy. Let me be clear that the Labor Party will support this legislation in this House and in the other place. But I take the opportunity to remind the House of some of the difficulties, and the Treasurer's incompetence, in dealing with this matter.

Firstly, there is history here. There are two people in this building who know how to introduce a bank tax: me and the Treasurer. We have both done it. When I was Treasurer I introduced a bank levy. The now government, the then opposition, said it would end Western civilisation, bring hordes of locusts upon us, wreck our economy and affect households. They did not proceed with that bank levy and a deal of revenue has been lost in the meantime. Now, lo and behold, the budget brings in a bank levy and the Treasurer says that it is different. Well, it is different, I will grant him that. It is 10 times bigger, in terms of revenue, than the levy I introduced as Treasurer. So, a levy that was 10 times smaller was terrible for the economy but a levy that is 10 times bigger is somehow fine, according to this Treasurer's way of thinking. So there is a lot of hypocrisy going on here on the part of the government when it comes to the bank levy, and it needs to be called out.

But what we will not do his behave like they did. They opposed the bank levy when we introduced it. They were obstructionist. They said that they could not support it, but we are not going to play that game. We will support the legislation. It is very important for the budget that we do. But we are not going to give this Treasurer a leave pass for his incompetence. It all started even before it was announced in the budget, when it was leaked. There are leaks out of budgets—of course there are. There are intentional leaks and unintentional leaks and all the time things are announced before they are announced in the budget speech. But rarely is it something as market sensitive and important as this. This was a very big leak from the budget and it moved the stock market as a result. The fact of the matter is that when the stock market moves so substantially some people make money and some people lose money, and this is what happened as a result of this leak. There are serious questions that continue to be asked about this and need to be answered. We asked the secretary of the Treasury at Treasury estimates. He said:

… on the basis of what we have been told by our staff, on the basis of informed discussion with my senior executives as to who knew what and when, I would be devastated … if I thought that one of my staff had been responsible for this. I have seen nothing in the time I have been secretary to make me think that it came from Treasury.

He said that there was only a small number of people at the Treasury who knew about this—five or so Treasury officials who would have been in a position to do this. How and when it was leaked is a very serious matter. It will continue to be assessed and probed. I note that there is an ongoing ASIC investigation into this matter, as there should be.

Then I move to the matter of the government denying reality about it being passed on to bank customers. Again I go back to when we introduced a bank levy when I was Treasurer. This Treasurer says, 'You said it would be passed onto customers'—referring to me. I was honest about it. I was prepared to tell the Australian people the truth and say: 'Banks will consider passing this on—it is a modest levy and may be added to some transactions that banks put on it.' I was prepared to call it how it was. This Treasurer cannot find it within himself to be honest with the Australian people about this matter. He says, 'It won't be passed on and the ACCC will make sure it is not passed on.' The ACCC has been given the grand total of $1.2 million to monitor the situation. That is not going to do very much.

The fact of the matter is that when a bank is faced with a levy like this it has the choice of absorbing it and reducing profits—that is what absorbing means: reducing profits and returns to shareholders—or passing it on. Banks have shown in the past that they are certainly prepared to do that. I thought it was interesting that not only do I say that, but the government's own documents say that. After a whole series of denials, once the legislation was released we saw the regulatory impact statement. It says:

…it can be passed through to those the banks lend to (in respect of residential mortgages, business lending and personal credit), deal with or provide services to, or their non-equity funding sources (wholesale capital markets, depositors) or be borne by the banks themselves (through reduced profits, or via increased efficiency or other cost-cutting measures).

When the government's own regulatory impact statement says it will be passed on, and the Treasurer denies it, I think we have a very serious problem.

Finally I come to the matter of the black hole in the government's figures here. It is a very big one. The Treasurer brought down the budget on budget day and said it would raise an amount over the forward estimates. We took that in good faith. There was no reason to dispute it. But then, of course, the banks are required under law to make a disclosure to the Australian stock exchange about their liabilities and material changes to their financial situation. They have done that. One after another the big banks made their disclosures to the Australian Stock Exchange and, lo and behold, it fell short. There were five banks affected. Four have disclosed to the stock exchange, and we are looking at a very significant shortfall. Macquarie is the only bank yet to disclose to the stock exchange. They are taking their time, as is their right. But anybody who thinks that Macquarie is going to make up the shortfall is whistling Dixie, because they are the smallest of the banks affected and their liability is going to be less than the others. To suggest that they are going to make up the shortfall is nonsense.

So less than a fortnight after the budget was brought down we had a $2 billion black hole over the forward estimates in the Treasurer's numbers. That is a shortfall of $2 billion. This is a significant issue. The reason I raise this as a significant issue is that it goes to the Treasurer's competence. It also goes to the fact that they will need to make the $2 billion up. Will they make it up through further cuts? Will they make it up through tax increases? Will they change the definition of the banks liable to get more banks in the net? They have told us about competition. Will they actually get some of the smaller banks in the net to make up the shortfall or will they simply see the deficit blow out by a further $2 billion over the next four years? Time will tell, but we know that there is a $2 billion shortfall in the Treasurer's figuring. The situation is that the government has refused to acknowledge this fact. In fact, I am obliged to say that they are being fundamentally misleading about this. The Treasurer stood there and said, 'You're using the wrong figures. You should be using cash, not fiscal balance.' He thought he was very clever at question time. He said, 'You should be using cash, not fiscal balance.' The problem is: the Treasurer was wrong. Either he misunderstands his own budget or he chose to mislead the House. That is the choice that we are faced with when we look at what the Treasurer said. The cash figure was different to the underlying fiscal balance figure for one reason and one reason alone: this tax is paid quarterly in arrears, so one of the quarters was not counted and the banks reported to the Australian Stock Exchange their full four quarters. That is the difference. So the Treasurer was wrong and he owes this House an apology for what he said in that question time, but I do not hold my breath that we will get it any time soon.

There is the final nail in the coffin for the Treasurer's competence when it comes to the bank tax. I made mention of Macquarie Bank and the fact that they have not yet disclosed their liabilities under the tax to the Australian Stock Exchange. They can choose when to do that. But we see the speculation that they will leave Australia. I do not know whether they will or they will not, but it is quite clear that this was put together so quickly, it was so rushed, because the Treasurer had a black hole in his budget that he needed to fill and he did not think through all of the ramifications. If Macquarie Bank is not domiciled in Australia, they will not be paying the tax in Australia. We know that the Treasurer had other ideas and they all fell apart at the last minute, so he had to come up with the bank tax at the last minute. That is why this has been so significantly botched by the Treasurer. I must say, I am not surprised. Most things that he touches manage to get botched.

I emphasise that we support the legislation because we are prepared to help the government in budget repair, but they make it hard sometimes. Gee, they make it difficult. You try to give them support and yet they manage to bungle the implementation so comprehensively. It is for that reason that I move the second reading movement, which has been circulated in my name, to allow the House to fully aerate these issues and debate the government's competence when it comes to this. Notwithstanding the second reading amendment, I commend the bill to the House. I move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House notes:

(1) there is support in the Parliament for the major bank levy;

(2) the big four banks have made legal disclosures to the ASX that suggests there is a $2 billion Budget black hole in the major bank levy forecasts;

(3) the consultation process leading up to the tabling of this legislation was badly mishandled by the Treasurer;

(4) the Government should come clean on the potential impact that the levy will have on consumers;

(5) the Government has instituted at least 12 Government reviews and measures relating to the banks, doing everything other than institute a Royal Commission; and

(6) only a Royal Commission into the banks will deliver the systematic, structural and cultural change that the banking and financial services sector needs”.

Amanda Rishworth (Kingston, Australian Labor Party, Shadow Parliamentary Secretary for Health) Share this | Link to this | Hansard source

I second the amendment.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.

I also understand it is the wish of the House to debate this order of the day concurrently with the Treasury Laws Amendment (Major Bank Levy) Bill 2017. As there is no objection, the chair will allow that course to be followed. The question now is that the amendment be agreed to.

Andrew Broad (Mallee, National Party) Share this | Link to this | Hansard source

It gives me pleasure to talk about the Major Bank Levy Bill 2017 and the Treasury Laws Amendment (Major Bank Levy) Bill 2017. Let's begin by saying that banks are a partner to Australians reaching their aspiration. As a young, hardworking tradie, when I was 22 I managed to convince the bank to loan me $400,000 so I could buy my first farm. I would not have been able to buy my first farm if the bank had not loaned me the money, so I was able to turn a dream into a reality through the help of finance. So banks are a partner to us. This is not about bagging the banks, this is not about being overly critical of the banks; this is actually about them being a partner back to the Australian people. I also remember the wise words of a guy called John Fox who came to see me as a 22-year-old with a massive debt. He said, 'If you get yourself in trouble, son, come and talk to us.' Agriculture, which was the field that I had invested in, was one of those things where the wind can blow against your face and it does not work for you. He said, 'Just come and talk to us.' And I think that is what people are looking for in our banking sector. They want a bank that is a partner. To achieve their dreams and aspirations, they want to make repayments and pay off that investment they have bought or that house they have dreamed of owning, but they see the bank as a partner.

But we—the Australian people and the Australian government—are also a partner to the banks. In the global financial crisis the banks came to us and said, 'Would you be our guarantor?' And we did that, not only because we believe in a strong and stable financial system; we also wanted to give confidence to Australians that had money in the bank. So now, as we find ourselves in a situation where, as a country, we have national debts to pay back, it is fair and reasonable that the banking sector should contribute to returning the balance sheet of the Australian people to a healthy position.

I find it fascinating that for a long time the opposition was critical of us, saying we were too close to the banks—we were friends with the banks. Now that we bring in what is essentially a levy, they are looking for a point of difference instead of just embracing it. I think they do need to embrace it, and I am pleased that they are getting there, even if it is through gritted teeth.

I believe that the big four Australian banks need to show more of a partnership with regional Australia. What I am increasingly seeing is the likes of Bendigo Bank—some of the smaller tier, second banks—opening community banking branch models in our regions. But, as an MP representing one-third of the state of Victoria—a profitable third, I have to say, if you look at the $5.3 billion worth of economic activity in my patch—it saddens me that the big four banks are still shutting down branches in our country towns. They are arguing that people are accessing their finances online. That is true to an extent, but you still have to go somewhere to open an account, and, when you are dealing with substantial payments going into your bank account from suppliers, you want to have someone you can talk to.

To conclude my remarks, can I say that we are a partner to the banks. We have been their guarantor. We are surprised at any push back on us, the Australian people, asking them to contribute. I think this contribution is fair, reasonable and measured, and I commend the Treasurer for it. But I also ask for their ongoing partnership with regional Australia in providing the services that regional Australia requires so that people can maximise their opportunities and their dreams. They cannot do that if the branch is shut. I would say to the big four: 'You're making plenty of money. Provide the service to regional Australia.' That is my plea, and it is my sincere belief that it is their obligation as responsible financial lenders.

Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

Thank you for the opportunity to speak on the Major Bank Levy Bill, also known as the bank tax, and not just to offer the support of this side of the House for the bill in principle but also to talk about some of the things which are concerning when it comes to the way the government has gone about devising and trying to implement this bill.

We make it clear from the outset that we support the cognate bills; we support the measure. But our job on this side of the House is to hold the government to account on the implementation of the policy, and there are a range of reasons why we are a bit concerned about the way the government has gone about what should be a good initiative. Given the state of the budget, the state of the books, we should be looking for ways to repair the budget in a way that does not ask the most vulnerable people to carry the can, but there are still concerns about how the government has gone about implementing this bank tax.

The banks themselves have claimed that there is something like a $2 billion hole in the government's costings. Obviously that would be a very troubling development if it were true. We have sought assurance from the government that that is not the case, but unfortunately the Treasurer's answers have made us more worried about the costing of this initiative rather than less worried. That is not an uncommon thing when it comes to the Treasurer, but it remains the case that we have been given no confidence that the costing of the bank tax is appropriate and is right.

We have also been given no assurance around the passing of the bank tax on to consumers. Those opposite say they have funded the ACCC to do that task, but it has been funded for only a year—I think $1 million in total—which is insufficient to do that important policing task. The banks themselves say they will pass it on, and nobody on that side of the House has given the people I represent, the people we represent, the assurance they need that this will not be just another pressure on household budgets. Another concern: unfortunately in the comments by the member for Mallee I thought there was a bit of a sense that this somehow excuses those opposite for the protection racket they are running on the royal commission we should have into our financial system, to get to the bottom of some of this injustice and poor treatment of customers. We need to get to the bottom of it so we can have confidence in our system, which is otherwise strong but has fallen down badly when it comes to the treatment of ordinary Australians in this country.

The fourth main thing that concerns us about the bank tax is that at the same time as they want a pat on the back and want this kudos for instituting a bank levy they are giving something like $10 billion out of the $65 billion company tax to just four companies—the four big banks. They want us to say, 'Oh, well done; you're taxing the big banks and recognising their power in the market by instituting a bank levy,' but at the same time they are giving them, with the other hand, something like $10 billion over the medium term. It is pretty extraordinary to think that almost a sixth of that really big company tax cut will go to just four companies, and they will be the four big banks.

So I think what we have seen here is a rushed policy. I think what happened was that it got quite late in the budget process and the government had run out of options, so they put this on the table. They had not done enough of the thinking or enough of the work to make sure they got it right—again. Unfortunately, that is a characteristic of this Treasurer in particular but indeed of the whole government. That is why we on this side call the Treasurer 'Butterfingers'.

Amanda Rishworth (Kingston, Australian Labor Party, Shadow Parliamentary Secretary for Health) Share this | Link to this | Hansard source

That is not the only thing!

Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

No, that is not the only thing, as the member for Kingston reminds me. But 'Butterfingers' is really just a summary: with all of these things that the Treasurer has been called to do, he generally makes a mess of them. Even with something that seems as simple as instituting a bank levy on five companies in the economy, the Treasurer has managed to make a mess of it. And when we look more broadly across the Treasury portfolio it should not surprise us to see the Treasurer make a mess of the bank tax. He has made a mess of the whole 'jobs and growth' agenda in the budget that was handed down a few weeks ago from that dispatch box. We had a budget that anticipates, for example, 95,000 fewer jobs in the economy than were anticipated just a year ago, in the budget before. We have wages growth at record lows, but the budget miraculously assumes we will get back to wages growth not at 1.9 per cent—which is where it is now, which is a real wages cut—but at 3.75 per cent by the end of the forwards.

This is the sort of incompetence, the sort of unreliability that we get from this Treasurer when it comes to jobs and growth. On jobs, we have record high underemployment. People do not get the hours they need at work. We have those low wages, with real wages going backwards—all of these things. And really that is just the broader context for this particular stuff-up on the bank levy: generally, right across the portfolio, we have big problems under this Treasurer's watch.

Fiscally, we have had a bit to say today, and there will be a bit to say tomorrow, as well, about the fact that these sorts of measures are necessary because the budget has deteriorated quite substantially on the watch of those opposite. And this is not an opinion; the numbers in the government's own budget papers show that we have had an extraordinary blowout in deficits, that we have had an extraordinary blowout in debt, whether you measure that in net terms or gross terms.

Tomorrow, unfortunately, for the very first time in our history, Australia will break through half a trillion dollars in gross debt. Under those opposite, we have record net debt as well. In this budget, the deficit for the coming year is more than 10 times bigger than it was projected to be in Joe Hockey's first budget. That is an extraordinary blow-out. That then flows through to the debt figures. It is worth reminding the House that, when those opposite say that they are the party that will pay down debt and deficit, they are accumulating debt in this country at a faster pace per month than happened under Labor—and Labor had a global financial crisis to deal with. This Treasurer has relatively rosy economic conditions, at least globally, and he is accumulating debt at a faster rate than Labor did. Labor had to deal with the sharpest synchronised downturn in the global economy since the Great Depression. That gives you a bit of a sense of the situation.

There are those people who say, 'There is good and bad debt' and all of those sorts of things, and people will make good arguments about the level of sustainable debt in this country. But the one thing that those opposite cannot explain is why they have failed the test that they set for themselves. Paying down debt was supposed to be their reason for being—not just under the former regime, under the member for Warringah's government, but under the member for Wentworth's government. We get all this rubbish about how they are superior economic managers: 'We are going to pay down the debt.' Debt is blowing out at a faster rate now than it was under the Labor government during the global financial crisis. That is a pretty stunning thing. And we have got all of these blow-outs. That is why the government finds it necessary to try to implement the bank tax that we are talking about right now.

The first bill, the Major Bank Levy Bill 2017, gives effect to the budget measure. It applies to the big four banks, as I said, but also to the Macquarie Bank. It sets out the rate that entities with more than $100 billion in total liabilities have to pay—0.015 per cent of applicable liabilities per quarter, which is 0.06 per cent annually. It also sets out what liabilities are applicable for the purposes of the levy. The second bill, the Treasury Laws Amendment (Major Bank Levy) Bill 2017, makes a series of consequential amendments to legislation in connection with the introduction of the bank levy.

As I have already said, we will not stand in the way, but nor will we be silent when it comes to the committee process of getting to the bottom of some of these implementation issues around the costing and around the pass-through. Also, of course, we will take every opportunity to say that action on the banks will never be complete unless it includes a royal commission, which the Australian people desperately want to see so that they can have confidence in their banks and in the way they treat their customers.

The government want the Australian people to think that the centrepiece of the budget was the bank tax. They want us to think: 'We have changed; we have learnt. We know that you were not really keen on the approach we have been taking for the past three years, so we are going to be like a leopard which can change its spots, and all of a sudden we're for the little guy.' That is designed to camouflage the real centrepiece of this budget: the way that all the benefits get showered on the top end of town at the expense of people who work and people who struggle. Whether that is the tax cut for millionaires, which comes in on the same weekend as the pay cuts for people who work and get penalty rates, or whether it is the $65 billion tax cut for the biggest businesses in this country, we see these really warped priorities. No bank tax will properly camouflage or obscure a government which governs every day for the top end of town at the expense of people who work and struggle.

The Australian people are not fooled. The truth of it is that they are quite keen on a bank levy, but they know that that does not best symbolise what this government is about, which is that it goes after the most vulnerable people in our community, taking money out of schools and hospitals and out of the pockets of vulnerable people and giving it to the most powerful people in our economy. That is why the government has fallen so far in the esteem of the Australian people—and that is before we get to some of the things that it will not do. It will not crack down on tax breaks for wealthy property speculators. It will not crack down on capital gains tax concessions. It will not take real action on multinational tax avoidance. These are all the sorts of things that the Australian people need and deserve if they want their budget to be improved in a way that is fair, which is what we are all on about.

We do have concerns about the bill. We do not oppose it in principle and we will not stand in its way, but we will take every opportunity to point out the deficiencies in the way the government have gone about it, the deficiencies in their broader approach to tax, their warped priorities in the budget more generally and the causes and consequences of what will be half a trillion dollars in gross debt, which we will see tomorrow, which is a shameful figure from a government who pretend to be superior economic managers.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

'Labor will not stop the Liberals' levy on the banks.' Hallelujah! That was one of my favourite lines from the opposition leader's budget reply speech, given he was responsible, as part of the previous government, for the deficits that the member for Rankin, who is opposite me, was just speaking about. When common sense prevails, it is a beautiful thing. If only we saw more of it from those opposite—from the negative Labor Party opposite that oppose everything and that created the mess that we are in with these massive deficits, since John Howard left, and compound interest that many of them might not understand. That has created the problem we are in today.

The major bank levy is common sense. It is a fair call for Australian banks, which are the second most profitable in the world. Australian banks outperformed their international peers during the GFC. They work hard, work smart and do well. The member for Mallee made a great point in his speech before about how the banks were supported during the GFC as well. The major banks are also major corporate citizens with a major social responsibility that flows as a result of their major market interest.

We want our major banks to be the most profitable in the world. We want that. It is a good thing. That is why the coalition government supports their success. We are also committed to reducing the debt that accumulated during Labor's decade of deficits, and we all have a role to play in that—the major banks included. The five majors together account for more than 80 per cent of lending for housing, gross loans and advances. Reporting total profits of more than $30 billion after tax, their dominance and success is a result of more than just their strategy and savvy. They occupy, of course, a privileged position as providers of essential financial services and enjoy enviable success, which, by anyone's measure, represents an excellent return on investment.

This bill requires of them a fair additional contribution, given their concentration. The major bank levy will apply to authorised deposit-taking institutions with liabilities of more than $100 billion and will tip $1.5 billion a year into the public kitty. Estimates are that the levy will pluck roughly four per cent from the banks' bottom line. That is something I urge them to consider as an investment. Australians are fortunate to have many banking options, and I am inspired by the success of some of the smaller banks, community banks, credit unions and building societies. It is great to see some energy in that sector. The Treasury Laws Amendment (Major Bank Levy) Bill will contribute to meaningful budget repair and address the debt accumulated by a decade of Labor deficits. We have a responsibility to reduce this debt now so as to avoid it becoming our children's unfortunate inheritance.

The coalition government is committed to the responsible financial management of our nation's affairs. Budget 2017 represents a comprehensive solution to debt racked up under Labor. It addresses the rising cost of living, increasing energy prices and supply and housing affordability. It eases the pressure on hardworking Australians and their families. It tightens the safety net that supports Australians in tough times and guarantees essentials—schools, pensions, infrastructure and health care. It provides relief for small and medium businesses and drives job creation.

But the essentials cost money, and we cannot continue to live beyond our means. Those opposite, we know, have learnt nothing when it comes to that. At the last election they promised $16 billion in additional debt after the havoc they unleashed on the nation during the Rudd-Gillard-Rudd years. That is why, along with providing necessary funding, budget 2017 finds savings elsewhere, including the $6.2 billion over the forward estimates as a result of the major bank levy. The levy is set in legislation at a rate of 6c of every $100 of specified liabilities and only applies to the big four banks and Macquarie Bank, each of which currently has liabilities greater than $100 billion. It includes other bank brands operating under the same licence as the principal bank as well. It will be deductible for corporate tax purposes and, consistent with ordinary expenses, does not generate franking credits. The levy, of course, does not apply to deposits protected by the Financial Claims Scheme, which applies to protected deposit accounts of up to $250,000 per account holder. It also does not apply to mortgages. It also does not apply to additional tier 1 capital held by the banks to help meet their capital requirements, which protects the stability of the financial system, or to a bank group's nonbank businesses—for example, insurance or superannuation.

The introduction of the major bank levy is just one way the coalition government is securing brighter days for all Australians, and that includes the banks as they stand to benefit as result of the retention of our outstanding credit rating. Bankers historically have had a reputation for trust. In the generation before mine, and even now in some cases, the bank manager was an influential and highly respected member of the community. It would be good to see that same sense of community from the major banks, who might use this as an opportunity to build loyalty with customers, to boost customer satisfaction and to do the right thing. Customers have tolerated increased fees, streamlining of services, cost-cutting measures and disappearing branches, as well. The Deception Bay community in the Petrie electorate, home to more than 20,000 people, does not even have a bank. I have written to some of the banks on several occasions and asked them to set up a bank in Deception Bay for the Deception Bay community. We cannot convince one of them to set up shop. It is a high-growth area and home to hardworking Australians, to young people, to retirees—they all bank their money but cannot do so locally. With Deception Bay's 13,634 square metre shopping centre currently undergoing significant refurbishment, I hope they will consider moving into the neighbourhood.

Many major bank customers have been banking with the same bank all their life—it is a common thing. They signed up for the old coin-in-the-envelope primary school savings bank schemes and have remained loyal ever since. I would say to the major banks, it is easier than ever to switch. You can switch to the Bank of Queensland, Bendigo Bank, Suncorp-Metway or whoever it is locally. Banks invest good money in actively working to communicate with and retain their customers. Absorbing the bank levy rather than handballing the cost to your customers would be an excellent relationship builder and an exercise likely to pay dividends. Ensuring a strong financial position is in the financial interests of all of us.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

Six years ago, in June 2011, I gave a speech to the Australian Bankers Association. They are not necessarily good friends of the Greens, but it was a speech I gave in the context of the world responding to the GFC and the growing revenue problems that were facing the government. I said that there was one thing we could do that would help level the playing field between bigger banks, which get the benefit of a big, implicitly 'too big to fail', subsidy from the public purse, and their smaller competitors, which would also generate some money for the public purse. Back in 2011, on behalf of the Greens, I called for a levy to be imposed on the big banks. We said: if we impose a levy on the big banks only, and do not make it an across-the-board levy that applies to every bank, we will limit the ability of the big banks to pass it on to customers—because if they try to do that people can just walk down the road to another bank or credit union that has not had the levy put on them—as well as generate a return to the public purse. At a time when government had been saying that the only way to get the budget back into balance was to attack people on welfare or perhaps cut funding from schools, we said: 'No. There is a better way of doing it. Stand up to those big banks that are making world-leading record profits.'

Why do the big banks make world-leading record profits? There are a number of reasons. One is the oligopoly that exists in Australia. The second, and most important, is the four pillars policy, which is effectively a too big to fail policy. What that means is that the government says: if any of the big four banks get into trouble, we will step in and bail them out. It means that the big four get to go overseas and borrow money more cheaply than their smaller counterparts because they know they have got government standing behind them, and that helps entrench their market dominance.

We saw this in practice during the GFC. When all of a sudden no-one could borrow money from anywhere, what did the government do? The government said to the banks, 'We'll stand behind you and guarantee your wholesale funding.' But they actually gave the big four banks a cheaper rate than everyone else. The big four banks during the GFC—everyone will remember who was in government then—got a cheaper rate than everyone else. As a result, the big four came through the GFC with a greater market share than when they went into it. They were able to take over a couple of smaller players. They came through with a greater market share and barely registered a blip on their profitability. The government stood behind them when times got tough and proved that in this country we have de facto public subsidies of the big four banks. The big four banks make a motza because the government, whether they are Labor or Liberal, stand behind them as a way of helping out.

Wouldn't every business in this country love to have the government standing behind them as guarantor every time they go and seek funds to expand their business? You do not get this in tourism. You do not get the government willing to help you out if you find yourself in a tight spot when there is a financial crisis or things get tough. You do not get it in manufacturing. But you do get it in the finance sector, for some reason. You do get it if you are one of the big four banks. That is why they have such a stranglehold on this place and that is why back in 2011 the Greens were the first to propose that we put a levy on the major banks.

At the time, we tried to get the other parties to agree to it. We tried to get Labor, who were in government at the time, to agree to it and they said no. They said they would only consider levies that applied across the board, to which we said: 'That way you can just pass it on to the customer. What is going to stop them passing it on to the customer?' We tried to get the Liberals interested in it, and they said: 'The Greens always want to go and tax the big banks. We need to do other things to balance the budget. We can't keep attacking the big banks.' They did not mention that, on the side, the big four banks were some of the biggest donors to their electoral campaigns and that also there was a revolving door between members of government, their staff and the big banks themselves—a practice that continues to this day.

But a good thing about this place is that a good idea will always have its time, because the pressures of declining revenue for the government have been too big to ignore. The government told us for a couple of years that there was no revenue problem; there was only a spending problem. But anyone can see that if we are to fund the services that Australians rightly expect we are going to need to deal with the revenue side.

In exactly the same way, before the last election the Greens were the only ones calling for legislation to protect penalty rates in law, in the event that the Fair Work Commission cut them. We were howled down by Labor and Liberal at that stage. We were told, 'Don't move to protect penalty rates in law, because it's not going to happen; you're not going to get a cut in penalty rates from the Fair Work Commission.' According to the Leader of the Opposition aliens might land from outer space sooner than penalty rates being cut. But we said, 'No, there is a need to protect penalty rates in law.' We were howled down at the time, but it turned out that we were right and that people's pay in this country was under attack.

Then, as it became apparent that parliament had to do something, Labor came in behind the Greens' position. I welcome that. It was not the position they took to the election, but it is good to change your mind when it means you can protect workers, especially when you can protect young workers. So I am equally pleased that the government has finally been mugged by reality and has seen the light and realised that there is a case for standing up to the big banks. There is a case for saying, 'You're making world-leading record profits; you're making them in part off the back of public support; the public is entitled to a little bit back.' There are fairer ways of balancing the budget than what the former Prime Minister did at the time that we were arguing for the bank levy. The former Prime Minister, the member for Warringah, said, 'No, I am not going to have a bank levy—I am going to increase the cost of people going to see the doctor; I am going to put up the cost of going to university; and I am going to cut funding to schools and hospitals.'

That was there alternative back then. The people and the parliament stood up to him and his government then, and said, 'Go back to the drawing board—there is a better way of doing this.' We changed the Prime Minister, and it took a little while but we changed some of their policies as well. Some of those measures to try and balance the budget and raise the revenue that is needed continue, unfortunately, and in this budget, of which this bill is a part, we are having to fight with the government deciding that they will attack universities and students to try and raise revenue.

This bill is an admission that the Greens were right. This bill is an admission that you can stand up to the big banks and ask them to pay a little bit more, and the world will not end. In fact, it will mean that there is a bit more space in the budget for to pay for schools and hospitals, and you do not need to take the axe to the young, the old, the sick and the poor. We are disappointed that the government has not adopted our original proposal, because our original proposal would have raised significantly more than what is being proposed here. Our original proposal would have brought in around $2 billion to $3 billion a year. Our original proposal was based on what those arch-Marxists, the IMF, thought was a fair place to set the bank levy. The IMF said, 'Yes, there are these things called too-big-to-fail banks; yes, they do deserve to have to pay a bit more. Set a levy at around two-thirds of the implicit subsidy they get, and you will not only level the playing field, you will make sure that the banks don't engage in risky behaviour because they know, or they think they know, that they have the government standing there behind them.'

If we had set the levy on the basis of a bit of rigour and logic and guidance from the likes of the IMF, we would be raising substantially more, and it would put us in line, on average, with the kind of levies that are in place elsewhere around the world. It would not have been that big a stretch. If we are going to stand up to the big banks, let's do it properly; let's do it at the level that others have recommended. If we had done that—if this bill had taken the full Greens proposal and run with it, instead of just half picking it up—you find that we probably would not have to be cutting university funding in this budget. We would not have to have a Medicare freeze that continues for a fair bit longer than the government would have us believe. We would not have to have people on Newstart continuing to live below the poverty line. We could give people on Newstart the pay boost that they deserve rather than leaving them in a poverty trap. Had the government had the courage to do that, not only would the budget be in a better position but everyone in this country would be.

As I say, the government has been mugged by reality. They have been mugged by the budget reality. They have been mugged by the reality that the big banks are in an incredibly privileged position. But they have also been mugged by another reality, which is that the public has decided enough is enough. The public is crying out for politicians who will stand up to powerful interests and make them contribute their fair share. Again, it is clear in this respect that the banks have been getting away with murder, financially speaking, and that they have been making massive profits off the back of public subsidies, and people have said it is about time that they paid a bit of a contribution. So the government has had to have a nod towards that. They have not gone the full way by putting in place a levy that would be meaningful and would address to a fuller level the support they are getting, but at least they have gone some way.

What that leaves is a gap. This levy does not fully cover the implicit subsidy that the big four banks, and potentially Macquarie Bank, get. This levy does not fully recoup the implicit too big to fail guarantee, and that is something that we should remember the next time a financial crisis hits. No-one within this place or within the banking sector predicted the GFC, but the banks were very quick to come out and say, 'We'd like a bit of support, otherwise the whole financial system in Australia is going to freeze.' This levy does not fully account for the support they have been given or the support they are going to continue to receive. That is important because there is every chance that, if there is a crash in the housing market, the banks will come cap in hand again to this place and say: 'We are in trouble because we have written so much of our loan book for mortgages that have now helped push prices up beyond the reach of most young people and many people generally. We are in all sorts of financial trouble. We need your help.' We should remember when that moment comes that this levy does not fully account for all the public support that those banks get. Some of those banks have said, 'We'll never come back asking for help, and we didn't ask for it the first time around,' but they did not turn it away when it was offered. They quite happily took up those generous rates of the wholesale funding guarantee and allowed themselves to come out the other end of the GFC in rude health.

Hopefully, this is the start of government being a bit more suspicious next time one of those big four banks comes along, because we have admitted by this bill that they do enjoy a subsidy. We have not recouped the full amount of that. If we are going to have a four pillars policy in this country, then at least what this bill does is start to call a spade a spade and say, 'It is time for you to pay some of it back.' But there is a lot more that needs to be paid back. People rightly know the big banks have been making world-leading record profits. They can afford to pay a bit more, and, until we fully account for the subsidy that they have been getting, there is no case for the government to ask students to pay more, there is no case for the government to ask people to pay more to go and see their doctor and there is no case for keeping people in poverty by keeping Newstart so low while the banks still get away with not fully paying their fair share of tax.

Melissa Price (Durack, Liberal Party) Share this | Link to this | Hansard source

It is pleasing to see the Greens' support for this very important legislation that we are debating here today. The Treasury Laws Amendment (Major Bank Levy) Bill 2017 will introduce the major bank levy for all banks with liabilities of at least $100 billion, raising around $1.5 billion per year. This is a great arrow in the quiver for the Australian taxpayer to use against the banks that have unquestionably had an armchair ride in Australia, and have had for some time. This represents a fair additional contribution from our major banks in recognition that their size and scale poses a structural risk to the economy. Banks, as we know, hold a very special social licence in our community. Compensation to the community through this government bank levy is, I believe, appropriate.

This measure provides a more level playing field for smaller banks and non-bank competitors. It is not unique. In fact, many other advanced economies, including the United Kingdom, have a bank levy. The United Kingdom has a bank levy several basis points higher than what is being proposed in this bill—and their financial sector is undoubtedly one of the strongest in the world. With that in mind, it is appropriate to note that Australian banks are the second most profitable in the world.

This measure contributes to budget repair in the short term but is a permanent structural change to the way major banks will be taxed. This is a very small levy by the banks' standards, at only six basis points. Debt funding costs for the major banks are estimated to have fallen by around 35 basis points over 2016. So, by comparison, this levy is a drop in the ocean. It is entirely possible for these large banks to absorb these changes without having to offload even one mortgage or one staff member or raise interest rates by even one basis point. Any argument from the bank that they will have to raise interest rates in order to recoup the cost of the debt levy is blatantly false—and it should be called out whenever it is repeated.

But it appears that those opposite are only interested in parroting the talking points provided to them by the banking sector. How unbelievable is it that we have the opposition front bench, and also the Leader of the Opposition, using the same rhetoric that the banks have been using when obviously, by any measure, they can afford to pay this levy. We on this side thought that those opposite were interested in actually tackling the issues with the banks; but it would appear that, when it comes to how much money the banks contribute to our economy, their voices are silent.

The banking sector has made hay in this country for years. Following the GFC, there was a belief in the financial sector—appropriately—that these banks, which place systemic risk in our financial system, would be backed by the taxpayer in the event of their collapse. That policy support has allowed the banks to borrow at a far lower rate than their small and medium-sized competitors. That lower borrowing rate has allowed them to muscle even further into the heart of our economy and increase their market share. In doing so, they have increased the risk they pose to the economy should they collapse.

The levy is set in legislation at a rate of six basis points and will apply only to the big four banks and Macquarie Bank, with each currently having liabilities greater than $100 billion. But there are exceptions. We know that the large banks are highly profitable, earning total profits of over $30 billion a year after tax, benefiting from their dominant position in providing essential financial services. The levy will raise around $1.5 billion annually, or some $6.2 billion over the forward estimates. It is in the interests of the banks, the government, the opposition and, most importantly, the taxpayers of this country for the banks to accept this levy and simply move on.

The banks can choose to absorb the cost of the levy in the same way that small businesses around the country, and also families, absorb the increased costs they may face from time to time. To guard against the banks trying to use the levy as an excuse for significant changes in mortgage interest rates, the ACCC will undertake an inquiry into residential mortgage pricing. The Turnbull government has fully resourced the ACCC to undertake that inquiry, which I fully support.

Consumers have a choice as to who they bank with, and would I certainly encourage them to consider that if they do find that their costs are increasing as a result of the banking levy. We know that banks in other countries were able to absorb the cost, and this is ultimately in the best interests of the corporate citizens of the country.

I commend the bill to the House.

Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.