Could the budget impose an interbank levy on the big four tonight? There is certainly speculation in the media it might raise $6bn over 4 years. That would be enough to lift mortgage rates again. The weakish results in the past week, (NIM under pressure) and the threat of such a levy explains why major bank stocks are down today.
“The banks will be furious,” said one Coalition strategist of the budget that treasurer Scott Morrison will hand down tonight.
In the usual roll calls of winners and losers that follow each federal budget, the major banks are looking like they could be in the latter category in a big way.
Morrison announced yesterday that he had asked the Productivity Commission to review competition in the banking sector, warning there should “be no denying that there has been an increased consolidation of the position of the major banks.”
Then last night Sky News Business reported on plans to impose a levy on institutional inter-bank lending between the big four.
Now, the details are unclear and the Treasurer’s office isn’t commenting. But flows between the banks as they work on a daily basis to maintain their capital requirements are vast, and a levy – rather than a tax on profit – could conceivably see Treasury clipping billions of dollars over the four-year estimates period.
And the government needs the money: The Australian reports this morning that Morrison will tonight announce full funding of the National Disability Insurance Scheme beyond 2019, which will require finding $6 billion in savings.
It’s all part of a budget that’s increasingly shaping up as a comprehensive effort to reset the Coalition’s economic policy brand in the minds of voters after the Abbott/Hockey train wreck of 2014. Morrison has said the the budget won’t “tickle the ears of ideologues”. The arch-conservative thinking that shaped policy in the Abbott years to the disgust of the electorate is being jettisoned.
Instead, the budget is moving to neutralise Labor’s core political appeal on some hot issues. We’ll have:
- Measures to support housing affordability;
- The Gonski school funding reforms;
- New infrastructure spending;
- Some change on the Medicare rebate freeze;
- Payments for pensioners to help with energy bills.
Add to this:
- A change to the way debt is presented to distinguish between recurrent spending and investments in productive capacity, and
- Pain for the banks.
This is a budget that aims to supports people who are struggling, recasts the dumb conversation on “debt and deficit”, and tackles the perception that the Coalition is too cosy with the top end of town. It aligns with Turnbull’s pleas to the Liberal Party to build its support base from the “sensible centre”.
The four major banks have just posted a combined interim profit of $15.6 billion, but there have been warnings that the operating environment for them is starting to look more challenging. And that was before it emerged that there’d be a Productivity Commission review and we had these reports of some kind of levy on interbank lending.
The banks might hate this, but it’s worth remembering that it’s only for the matter of a couple of thousand votes in some marginal seats that the banks are not right now facing a royal commission.
It should be an interesting night.
