Australia’s Banks Are Safe, So Deposit Levy Is Looking Like a Revenue Grab

by Dr. Andrew D. Schmulow

The Conversation, (2015), published electronically.

The closer one looks at the government’s recent decision to levy a deposit tax against Australia’s Big Four banks, the more it seems like a revenue grab. Nothing more, nothing less.

An inspection of the legislation reveals that in the event of the failure of an Australian bank, there is no need for a levy to fund a depositor bailout. That means this proposal is not a deposit levy. It is simply another tax, with little to do with protecting depositors in the event of a bank failure.

Three crucial factors substantiate this assertion: the Banking Act, the levels of retained capital, and hypothecation (the practice of pledging collateral against debt).

We’ll explain why.