Premier Jay Weatherill faces shock backlash over state bank tax, as Sunday Mail-Galaxy shows majority of SA rejects new $370m levy

PREMIER Jay Weatherill is facing a surprise public backlash against the $370 million state bank tax, as an exclusive Sunday Mail-Galaxy poll reveals the majority of South Australians oppose it.

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• READ BELOW: Q & A — Sorting fact from fiction over bank levy

LABOR faces a surprise public backlash against its $370 million state bank tax grab, as an exclusive Sunday Mail-Galaxy poll reveals the majority of South Australians oppose it.

The unexpected result will send shockwaves through SA Parliament, as Liberal MPs prepare for a party room meeting on Monday to decide whether to take the dramatic step of blocking the tax.

The poll results came amid news of more job losses, as Walker’s Exhaust announced yesterday that it would close its O’Sullivan Beach plant, costing 128 jobs, when Holden closes in October. It will end the company’s 30-year history in the state after attempts to diversify and survive the closure of Australia’s last car manufacturers were unsuccessful.

The poll finds 55 per cent of respondents are opposed to Premier Jay Weatherill’s new levy, amid fears that bank customers will ultimately pay through higher fees and charges and jobs and investment will be lost to SA. That compares to 28 per cent of people in favour of the tax, and 17 per cent who are uncommitted.

Full results of the poll, including a statewide poll of voting intentions ahead of the next election and preferred premier ratings, will be published in the Sunday Mail.

The tax measure was announced without warning in the State Budget last Thursday, and is set to come into force from today.

Mr Weatherill’s levy mirrors the one announced by the Federal Government earlier this year, and is set to raise $90 million per year from the five big banks. A Newspoll in May found strong support for the federal bank tax, at 68 per cent.

There are also new warnings today that both households and the State Budget are at risk of hits from higher interest rates on their borrowings as major banks scramble to respond to the tax.

Labor strategists expected the move to be extremely popular, after a positive reaction to the Coalition’s move in Canberra and string of recent financial sector scandals.

For Jay Weatherill, this was the last Budget before the 2018 polls.

Steven Marshall will have a party room meeting to decide blocking of the tax..

But the move for SA to go it alone has been met with fury from banks because they fear the tax will spread to other states. Yesterday, they were joined by a range of businesses, including pubs and sports clubs, which warned the tax would cost jobs and harm SA’s appeal to investors.

Real Estate Institute of SA president and Ouwens Casserly Real Estate director Alex Ouwens said the bank tax would hit the public directly, with the banks only acting as a “conduit”.

“As the state tax is selective to South Australia, this is an action that will have a negative impact,” Mr Ouwens said. “It will make SA less competitive as a result of this further impost on the public and thereby reducing discretionary income spending.”

Opposition to the tax is strongest among intending Liberal voters, 76 per cent of whom reject it. A slim majority of Labor voters back the tax, but almost a third of them are also against it.

Liberal MPs are split about what to do about the tax as they mull either joining the Australian Conservatives and Nick Xenophon Team to block it, or promise to roll it back.

The blocker camp believe it would be a decisive move that shows the party taking a strong stand on a controversial issue and set a clear distinction with Labor over backing lower taxes. Liberal MPs who favour a rollback after a March election win say blocking the tax now would give a future Labor opposition permission to wreak havoc on their Budgets.

The Sunday Mail-Galaxy poll of almost 900 people was taken on Wednesday and Thursday, before employer groups which support about 350,000 SA jobs issued a united public front against the tax.

Business SA’s advertisement in The Advertiser in relation to the State Budget's bank tax.

Bank industry sources also warn internal costings by the big four have found the tax would add hundreds of dollars per year to costs for average mortgage payers if passed on in full. They estimate an extra $200 per year charge against a modest $250,000 mortgage.

The big four banks lend $110 billion to mortgagees in SA and face a collective hit to their operations of $86 million per year if the state bank tax is passed into law by Parliament.

They estimate extra household interest charges of about 0.8 to 1.0 per cent if the tax was put on top of existing mortgages, lifting standard variable rates to about 6.21 per cent.

Commonwealth Bank Group treasurer Paolo Tonucci said he was “considering the current levels” of SA bonds the institution has, after ANZ dumped some of its holdings in the state. “We are unlikely to participate in future auctions,” he said.

Treasurer Tom Koutsantonis said SA bonds were held by a range of financial institutions, both Australian and international, and someone else would buy them if the big banks didn’t. “What is incredible is that the banks would consider this type of vindictive action directed at South Australians in order to protect their super-profits,” he said.

Q & A: SORT FACT FROM FICTION OVER BANK LEVEY

QWhy did Labor introduce the SA bank tax?

AJust like ATMs, the banks provided easily accessible money for a State Budget in need of cash. Since the GST was introduced, states have had limited ability to pump in revenue through taxes. The big four banks, plus Macquarie, were easy targets for Treasurer Tom Koutsantonis. The Federal Coalition had already hit them up in the May Budget with a $6.2 billion tax, providing political cover. Adding a $370 million state tax was guaranteed to make Opposition Leader Steven Marshall squirm — does he side with the banks and deny SA revenue?

QWhen does it start? How does it work?

AThe tax is effective from today. It will apply at a rate of 0.015 per cent of South Australia’s share of liabilities, subject to the federal major bank “levy” at the end of each quarter. Applies to the Big Four banks, Westpac, ANZ, Commonwealth and NAB, plus Macquarie.

QWhy are the banks so angry?

A They argue they have been unfairly singled out and there is no economic justification. It is not a tax on profits. Rather, the banks believe it is a tax on success and warn other industries might well be next. They are particularly worried about a domino effect, in which other states copy SA and hit them with a new tax. They have unleashed a furious campaign, backed by big businesses. They say it penalises shareholders and customers who don’t live in SA.

 ANGER: Cynthia Sajkunovic, a real estate agent for Ouwens Casserly, which has joined the campaign against the SA Government’s tax on the big banks. Picture: Sarah Reed

QWhat do the banks say is the potential negative impact on investment and business in SA?

AThey warn it deters investment in SA and jeopardises the state’s reputation as a place to do business. This will, they say, cost jobs and prosperity. BankSA has suspended plans to employ 150 people in a backroom centre. ANZ chief Shayne Elliott said his bank would probably lighten exposure to SA Government bonds.

QWhat is the potential negative impact on average South Australians?

ABanking industry sources say the big four banks have $110 billion in mortgage lending in SA. The cost of the bank tax to these four banks will be about $86 million per year. If this is passed on to householders, bank costings show between eight and ten basis points would be added to mortgages — that means a standard variable rate of 5.21 per cent would rise to either 6.01 per cent or 6.21 per cent. This would add $200 per year to a $250,000 mortgage.

QWhy aren’t the banks as angry about the federal bank tax?

A Despite opposition to the federal tax grab, banks at least partially understood the rationale of a national tax. The bipartisan support also muted any realistic chance of a successful campaign to strike it down. But they believe the SA tax is simply a politically motivated cash grab ahead of the March state election. Alarmingly for the banks, it opens the prospect of other states following and adding to the cash hit.

QWhy didn’t Premier Jay Weatherill consult his top investment adviser Rob Chapman before introducing it?

AThe Adelaide Crows chairman, a career banking executive, this week refused to back the tax and almost certainly would have done the same if asked in advance. “We’re naive to say it’s not going to have an impact. Businesses have to make decisions on the economic conditions they find themselves in,’’ he said.

QWhat is the state Liberal position?

AWho knows? After the Budget, Opposition Leader Steven Marshall promised the tax would pass into law but on Wednesday said: “I’m convinced this is a bad decision, and I’m gathering information.

“We’ll make a decision in our party room next Monday. It would be extraordinary for us to block this measure, but these are extraordinary times.” But the Liberals might be emboldened by an Advertiser/Galaxy poll showing majority opposition to the tax. They might waver between blocking the tax in parliament in coming weeks or vowing to roll it back in government.

QWhat does Nick Xenophon and the other crossbenchers think?

ASenator Xenophon and the Australian Conservatives have opposed the state-based tax. Senator Xenophon has warned it will damage investment at a time when SA needs to reinvigorate the economy in the wake of Holden’s closure in October.

QWhat does the Prime Minister think?

AMalcolm Turnbull has declared the question SA faces is whether the tax will make business in SA more or less competitive, suggesting the latter applies. He drew a distinction between his national tax but cautioned state-imposed business taxes would make a state less competitive.

QAre other states looking at copying SA?

ANSW has ruled out following SA’s lead but the West Australian Labor government has said the idea of a bank levy was an attractive option. SA Labor advisers have privately suggested WA is likely to follow.

QWhat could stop the bank tax?

AThe simplest method would be for the Liberals to block this aspect of the Budget in parliament. A court challenge is possible but not being actively considered by the banks — yet — because they are cognisant of the state’s expert constitutional law advice which underpins the tax.

QWhat will the $370 million be spent on?

AThe revenue gives the Budget a $72 million surplus in 2017-18. It will help fund Labor’s showpiece Budget measure — a Future Jobs Fund worth more than $200 million, targeting job creation in five key sectors. These include shipbuilding, defence, renewable energy, tourism, IT, advanced manufacturing and health research.

QDoes the banks’ deposit guarantee justify extra tax?

ADepends on your point of view. Those imposing taxes at state and federal level use it to support their argument, saying banks enjoy special treatment compared to other industries. But banks argue the federal guarantee is for deposits up to $250,000 and must eventually be covered by surviving banks in the unlikely event of a collapse.

QWhat will it mean for the election?

AThis depends on Mr Marshall’s response. Thus far, this has been less than adroit. Labor will keep demonising banks and stressing the tax does not apply to the SA public. The banks’ fierce opposition will continue. Today’s Sunday Mail-Galaxy poll might spook a few in Labor.