State Budget 2017: Big banks attack South Australia’s new $370m tax

UPDATED: The big banks could slug South Australian homeowners and businesses with targeted rate rises in response to the State Government’s bank levy, financial experts say.

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THE big banks could slug South Australian homeowners and businesses with targeted rate rises in response to the State Government’s bank levy, financial experts say.

SA Treasurer Tom Koutsantonis wants to raise $370 million over the next four years from a levy on the big four banks and Macquarie Group, but analysts say lenders could respond by hitting local borrowers in the pocket.

“We expect the banks to push back against the South Australian bank levy as they will not want the other states to follow SA’s lead,” UBS analyst Jon Mott wrote in a note to investors.

The responses could include raising South Australian mortgage and corporate loan rates, rationing credit in the state, or threatening to move call centres and processing centres elsewhere, Mr Mott said.

Such responses could have a direct negative impact on the state’s economy, which has the highest unemployment rate in the country and low growth.

Deutsche Bank analyst Andrew Triggs said the latest levy would have little impact on the banks’ profits but said it was unjustified and had wider implications.

“It further dents already fragile sentiment and raises the threat of increased political risk,” Mr Triggs wrote, adding that SA mortgage rate rises would be easy to implement.

Treasurer Tom Koutsantonis delivering his State Budget address in Parliament House with Premier Jay Weatherill looking on. Picture: AAP Image/Ben Macmahon

Prime Minister Malcolm Turnbull warned the Weatherill Government that the state-based bank tax may put South Australian businesses at a competitive disadvantage.

Mr Turnbull said the question Premier Jay Weatherill has to answer is whether his big bank levy was going to make business in South Australia more or less competitive.

“See, that’s one thing to have a tax that covers the whole country, but when a state imposes higher business taxes within its own jurisdiction, is that going to drive investment, support, jobs within that state or is in fact going to make it less competitive?”

Mr Turnbull confirmed South Australia had the power to apply the tax.

“States have taxing powers and they can raise such taxes as they wish and they do so,” he said.

Earlier, BankSA chief Nick Reade said: “The SA economy faces challenges but populism will not deliver the robust and sustainable economy South Australians deserve.

“The announcement in SA is not only bad public and economic policy, it is not in the interests of South Australians,” he said soon after Mr Koutsantonis unveiled the tax grab.

“We were disappointed by the Federal Government bank levy, but the SA proposal is double taxation and is a disgrace.”

Unsurprisingly, Mr Reade was not the only industry figure to come out fighting against the new tax, which mirrors the recent Federal Government move against Australia’s big five banks — Commonwealth, ANZ, Westpac, NAB and Macquarie.

BankSA forms part of the Westpac Group.

The Australian Bankers Association’s chief executive, former Queensland ALP premier Anna Bligh, said the policy was a “desperate political move”.

She said every premier and first minister across the country would now be called on to rule out a similar tax.

“Let me be clear — it is not the job of banks to prop up government budget shortfalls,” she said.

“The announcement is the worst possible signal to the business community in SA and will make SA less competitive, potentially driving jobs to other states.

“Tax policy in Australia is now becoming a joke, at the whim of political opportunism and SA is trying to impose triple dipping for bank taxation.”

ANZ boss Shayne Elliott described the tax as “deeply concerning” and one that “will likely impact business investment in SA at a time when its economy is struggling with low growth, low business confidenceand high unemployment”.

“SA does not need another drag on its economy after the repeated power failures over the last few years,” he said. “Given its issues they would be wise to be more welcoming of both investment and capital.”

Mr Elliott said Mr Koutsantonis clearly lacked an understanding of the role banking plays in supporting the SA economy and the damage that “opportunistic and ill-considered cash grabs will have on the long-term economic prospects of the state”.

A spokesman for NAB said the levy, which is expected to raise about $90 million a year, was “poor policy without logic” and introduced to “cover their own budget shortfalls”.

“South Australians want theirstate to be more attractive to investment that will enable it to transition its economy and create new opportunities and jobs,” he said.

Professor Sinclair Davidson, from the Institute of Public Affairs conservative think tank, said the policy was “precisely the sort of state-based nuisance tax that the GST was brought in to eliminate”.

Opposition Leader Steven Marshall is maintaining his criticism of the new bank tax but has conceded that his party will support the budget measure to pass Parliament.

“It will go through,” he said.

“(This) massive new tax increase will create no new jobs, and what it will do is drive investors away from South Australia.

“I think that we have become the laughing stock of Australia with these incredibly high taxes, high unemployment rate and the sky high energy crisis.”

Asked if it was hypocritical to criticise the state tax given it was first imposed by a Liberal Government at the federal level, Mr Marshall declared: “I will criticise anybody who increases taxes. We do not stand for increased taxes in the Liberal Party in South Australia.”

Mr Marshall said he would make the Liberal tax policy platform “very clear” in the lead up to the March, 2018, election.

“We will base it on the numbers that were released (in the Budget on Thursday),” he said.