The big five banks' threat to pass on the federal government's bank levy to consumers would cost customers less than $10 a year, a new report has found, as the Coalition's battle with the banks moves through its third week.
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Banks have no excuse: Treasurer
The "major bank levy does not give any bank an excuse to increase costs for their customers," Treasurer Scott Morrison says as he introduces his bank levy bill to parliament.
The report from the progressive think tank The Australia Institute is likely to be seized on by the Turnbull government a day after it wrote the $6.2 billion levy into law.
The institute found that if the banks followed through on the threat to pass the cost of the levy to shareholders via reduced dividends then it would cost the average superannuation balance $7 a year.
The majority of Australians who have a super account are shareholders in banks through their superannuation investment fund. According to the institute, the average superannuation balance holds $3141 of shares in the five major banks, with $166 in dividends paid in 2015-16.
A hit of 4.5 per cent from the tax-deductible bank levy to those dividends would equal about 60 cents a month, or $7 per year.
The figure follows weeks of calls from Treasurer Scott Morrison for customers to ditch their institutions if they attempted to pass the cost of the levy onto consumers.
The report found that if customers took up Mr Morrison on his advice to shop around at smaller banks not affected by the levy they could save up to $6000 a year on home loan repayments.
![Treasurer Scott Morrison during question time.](http://web.archive.org./web/20170602032237im_/https://www.fairfaxstatic.com.au/content/dam/images/g/w/b/i/0/p/image.related.articleLeadwide.620x349.gwi5ha.png/1496356709931.jpg)
"Ironically, if the banks choosing to pass on the levy to customers led to people shopping around, mortgage holders could be big winners," the institute's senior economist Matt Grudnoff said.
Ubank had the lowest standard variable mortgage rate, 3.74 per cent, according the institute, compared to the top rate of the Commonwealth Bank at 5.39 per cent.
![Westpac says the bank levy will cost the company up to $370m a year before tax.](http://web.archive.org./web/20170602032237im_/https://www.fairfaxstatic.com.au/content/dam/images/g/q/s/y/q/h/image.related.articleLeadwide.620x349.gwi5ha.png/1496356709931.jpg)
"The banks gain a big benefit from the implied government guarantee that they would be bailed out if they got into financial difficulties," Mr Grudnoff said. "It is only fair that the banks pay for this insurance."
A spokeswoman for the Australian Bankers' Association questioned the methodology of the Australia Institute in comparing like for like interest rates and said that it was not only big banks who were insured by government, but the whole system.
![Australian Bankers Association CEO Anna Bligh.](http://web.archive.org./web/20170602032237im_/https://www.fairfaxstatic.com.au/content/dam/images/g/w/2/t/s/b/image.related.articleLeadwide.620x349.gwi5ha.png/1496356709931.jpg)
"In terms of the implicit guarantee, during the depths of the global financial crisis there was a three-and-a-half week period when the Australian government guaranteed all liabilities of all banks for no fee," she said. "This means the whole system was supported, not just the major banks."
Mr Grudnoff, who has historically been critical of Coalition policies, praised the bank levy as a reasonable substitute for a super profits tax.
Mr Morrison agreed with Mr Grudnoff's sentiment, calling on banks to accept the levy as necessary to support schools, hospitals and pension payments.
"Many other Australians have had to deal with some hard decisions we have had to make over the last four years," he said. "It's a fair levy, it's a reasonable levy, it's in place in other countries around the world and its also a levy that banks are in a position to support."
Foreshadowing the passage of the legislation through the Senate, the Bankers' Association ramped up its attacks this week, accusing the government of wiping off $39 billion in market value of the big five since the budget.
The association now has its target set at getting the levy removed from 2020-21, when the budget is set to return to surplus.
"If this is a tax for budget repair, then it is only fair that it be removed when the budget is repaired," the association's chief executive Anna Bligh said on Tuesday.
Mr Morrison has pegged the levy rate at 0.015 a quarter on banks that hold more than $100 billion in liabilities, making it difficult for future governments to raise the rate without new legislation.
Shadow Treasurer Chris Bowen said Labor's in-principle support for the government's bank tax "was not a blank cheque".
"We will continue to explore these issues through a Senate inquiry into the legislation," he said.
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