Impact of bank levy ‘trivial’, Treasury secretary John Fraser says

The head of the Treasury has dismissed the impact of the $6.2 billion budget levy on banks as “trivial”, saying he expects it to have next to no impact on interest rates.

Impact of bank levy ‘trivial’: Treasury

The 2017 budget bank levy won’t raise your interest rates, according to Treasury secretary John Fraser.

Asked at a Senate hearing whether he stood by the budget forecast that the levy on the liabilities of the big five banks would raise $6.2 billion over four years, Treasury secretary John Fraser said he did.

“We are in the process of confidential discussions with the banks and we see no reason to change our forecasts,” he said.

Told that four of the banks had produced estimates that suggested the levy would raise less than the $6.2 billion forecast, Mr Fraser said much of the reporting of the estimates was too simple.

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

Asked whether Treasury had modelled the impact of the impost, Mr Fraser replied that it had.

“The results are what common sense would suggest: they are trivial,” he told the committee. “Trivial with respect to interest rates,” he added.

Mr Fraser sought advice from another Treasury officer sitting behind him, who described the impact of the levy as “negligible”.

Asked whether he had personally pushed for the levy in discussions with the government, Mr Fraser replied that the decision had been made by the government. Finance Minister Mathias Cormann closed down the line of questioning, saying it was inappropriate to ask the Treasury secretary for a personal opinion.

Mr Fraser phoned the executives of the five major banks on budget night ahead of the budget speech to alert them to the levy.

He was aware of what appeared to have been a leak of the government’s plans early in the afternoon of the budget speech. He was unable to calculate how much sharemarket trading had taken place as a result of the apparent leak. The Australian Securities and Investments Commission had referred the trading to the Australian Federal Police.

“I would be devastated if I thought that one of my staff had been responsible for this. I have seen nothing to suggest the leak came from within the Treasury,” Mr Fraser said. “Can I give you a guarantee the leak didn’t come from my department, no I cannot, but I would be devastated if it did.

“We deal with a lot of sensitive information. We have not been let down.”

Treasury began an investigation into the apparent leak the morning after the budget. The department’s chief operating officer, Peter Robinson, told the Senate committee that knowledge of the planned levy had limited to fewer than 100 people.

Mr Fraser said as a separate measure the security at future budget lockups would be much tighter. Personal computers would be banned and there would be stricter checks for phones.


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