The Coalition says it will not go ahead with a bank deposit tax, proposed by the previous Labor Government.
The move will deny the government $2 billion in anticipated budget savings. Prime Minister Tony Abbott and Treasure Joe Hockey made the joint-announcement on Tuesday.
“Labor’s bank deposit is dead,” Mr Abbott said.
Mr Abbott said it was very important Australia’s banks were safe and secure and the best way to ensure that was through “a good prudential regulatory system”.
“The last way to make our banks strong, the last way to protect depositors, is to hit banks with more taxes,” he said.
Mr Abbott said it would have been a tax on savings that would have affected everyone with a bank account.
“Now is exactly the wrong time to apply such a tax to bank accounts, when people are receiving lower returns than they may have expected in the past,” he said .
Two years ago Labor announced the proposed levy from 2016, and included the potential savings in its budget figuring.
The government’s financial system inquiry, chaired by former banker David Murray, made a recommendation not to proceed with a bank deposit tax, while asking banks to significantly increase their capital.
“In the last few weeks, a number of banks have raised between $2 billion and $5 billion of new additional capital. They may need to raise further capital,” Mr Hockey said.
“Therefore, it is exactly the wrong time to proceed with this sort of tax.”
The bank deposit levy proposed by the previous Labor government would be a 0.05 per cent levy on every deposit of up to $250,000.
Treasurer Joe Hockey said it was “wrong” to suggest he had been forced to backflip on the issue.
“We’ve been actively consulting with a range of different people, including stakeholders,” he said.
The Treasurer said the recommendations of the recent financial systems inquiry, which called for lenders to be better capitalised than most global banks, made the levy unnecessary and “bad policy”.
“The banks have now accepted that they have to increase their capital,” Mr Hockey said. “Therefore to proceed with such a new tax would simply be about harming depositors.”
Labor criticises ‘lame-duck Treasurer’
Labor plans to seek the view of the RBA governor on the stability fund and has not made its position clear.
In a statement, Opposition treasury spokesman Chris Bowen claimed that “Mr Hockey has been rolled by his colleagues who think he’s a lame-duck Treasurer”.
“Mr Hockey has changed his position on this issue more times than he’s changed his socks.”
The Greens had proposed changing the deposit levy by putting it only on the big four banks, arguing it would raise revenue without hitting savers.
– with AAP and ABC