On May 9, Treasurer Scott Morrison announced the 2017/18 Federal Budget. Overall, it was designed to raise more revenue for the government whilst at the same time seeking, in some way, to address the uneven playing field for the regional banks, Mutual banks, Building Societies and Credit Unions in Australia.
Only the five biggest banks in Australia (those with assessed liabilities of more than $100 billion) will be affected.
In the Budget, the Treasurer Scott Morrison put forward a number of solutions, including a bank levy of 0.06 per cent on the banks liabilities that are not covered under the Federal Government Retail Deposits Guarantee (currently $250,000 per individual). The levy is planned to raise approximately $6.2 billion over the next four years. That money will go toward future Budgets, and only the five biggest banks in Australia (those with assessed liabilities of more than $100 billion) will be affected.
The Treasurer has stated that the best form of consumer protection is competition. As CAPE and other customer-owned banking institutions are not affected by the levy, this could mean better value is available outside of the Big Four.
What other solutions did the Treasurer propose in the Budget?
Along with the $6.2 billion bank levy, Mr Morrison introduced the Australian Financial Complaints Authority (AFCA), meant to be a "one-stop shop" for all banking malpractice that would hopefully enable faster resolutions for consumers adversely impacted by the poor banking procedures that have been widely observed by the major banks over the last three years.
The Australian Prudential Regulatory Authority (APRA) has also been given more power regarding the directions and obligations it can impose on banks. The body can give out penalties of up to $200 million if those directions are not followed.
Does the bank levy do enough?
While the AFCA and APRA changes are a step in the right direction, the bank levy is the one measure that is designed to restore some balance to banking in Australia. The Big Four in particular have swelled in size since 2004, while others have only maintained slight growth per annum.
CommBank CEO Ian Narev claims that the bank levy will hurt all Australians, because technically everyone is a shareholder in our banking industry – but that's an exaggeration. As reported by The New Daily on May 16, a super account of $100,000 would have approximately $6,000 of bank shares, and before tax, the dividend earning on those would be $300 per year. After the bank levy, those earnings would only be reduced by 5 per cent, or less than $20 per year – not such a significant impact on everyday Australians after all.
To work with a banking institution you can trust, one that has never been in the press for poor customer practices, make sure you contact CAPE today.