Bank levy will have ‘trivial’ impact on interest rates, Treasury secretary says | Australia news

The Treasury secretary, John Fraser, has said the Turnbull government’s $6.2bn bank levy will have a “trivial” impact on interest rates, dismissing concerns by the major banks that it will be disruptive.

He told Senate estimates Treasury had no reason to review its estimate that the levy would raise $6.2bn over four years, despite forecasts from the banks suggesting it would raise much less.

Fraser’s comments come after two weeks of sustained criticism of the levy by the Australian Bankers’ Association, and the heads of Australia’s biggest banks, who are still angry with the government for proposing the levy without consultation.

Last week the major banks estimated how much the levy would affect their after-tax earnings, collectively putting the cost of the levy at $965m over the next 12 months.

Those forecasts prompted analysts at Deutsche Bank and Morgan Stanley to warn that the revenue collected by the levy could fall half a billion dollars short this year.

But Fraser told a Senate estimates hearing on Monday he did not believe that, given it was “very complex” calculating what the tax would raise.

“You need to consider the timing of the payments and tax deductions and issues about bank credit and credit growth over time,” he said. “We see no reason to step away from our forecast.”

He said Treasury had modelled the bank levy and it would have a negligible impact on interest rates. “The results are what common sense would suggest, they’re trivial,” he said.

However, the finance minister, Mathias Cormann, said the levy would help smaller banks become more competitive because they would have relatively cheaper cost structures as it was introduced.

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Ian Narev, the chief executive of Commonwealth Bank, last week told a business audience why the Turnbull government’s claim that the banks could “absorb” the new levy was wrongheaded.

Fraser also weighed into the housing affordability debate, saying the budget’s housing affordability measures would not reduce house prices.

When asked by Greens senator Peter Whish-Wilson if he was comfortable with young people entering the housing market at this point in the cycle, he said: “Look, you make a comment in this area and you never win, but I don’t take any joy in the fact that when I was buying a house in the 1970s it was a far easier process.

“For many families, it’s a bigger hurdle to jump than we ever imagined.”

Fraser was also asked about the leak that saw the value of Australian bank stock lose billions of dollars on the day the budget was released.

Fraser said he was considering overhauling the budget lock-up to make it harder for leaks to occur, even though the leaks occurred before the lock-up.

Sky News had reported on the evening before the budget that the budget would include a bank levy, and the Australian Financial Review reported further details on the morning of the budget.

But Fraser said the government relied on people’s honesty during the lock-up, and it was too easy for people to sneak mobile phones inside, and to use the internet on their personal laptops.

He said everyone may be given Treasury-issue iPads in the future, with USB sticks, to make it impossible to access the internet while inside.

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He said he would be “devastated” if any Treasury staff were responsible for the leak before the budget was released publicly.

An hour after Fraser’s testimony, Treasury released a statement clarifying his remarks. “At this morning’s Senate estimates hearing, the secretary stated his preferred approach to the IT security arrangements for these events in the future,” the statement said.

“There are a range of matters to be worked through to implement these changes including working with media outlets on their requirements. The final form and arrangements will be decided in conjunction with the treasurer’s office.”

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