ScoMo’s revenge: PM ‘might hike bank tax’

IF Australia's big banks all hike their home loan rates, Prime Minister Scott Morrison could get political revenge by increasing the bank tax he introduced as treasurer.

Industry experts say the Prime Minister may take the opportunity to pull the trigger on a tax hike targeted at the banks, which are under fierce scrutiny.

Millions of Australians households with mortgages have been warned to brace for higher repayments after Westpac yesterday hiked its interest rates.

It is the first of the big four banks to raise all variable home loan rates this year, lifting them by 0.14 percentage points.

 

Prime Minister Scott Morrison could take revenge on the big banks by raising the bank tax. Picture: Sean Davey
Prime Minister Scott Morrison could take revenge on the big banks by raising the bank tax. Picture: Sean Davey

 

A household with a $300,000, 30-year loan must now find an extra $26 a month, or more than $300 a year.

Industry experts broadly expect the other big banks - the Commonwealth Bank, National Australia Bank and ANZ - to follow suit by week's end.

It would deliver a rude shock to Australia's mortgage belt, and a baptism by fire to the new Prime Minister.

But if all the banks move, they could be in for a shock, according to a team of analysts at investment bank UBS.

The UBS team, led by Jonathan Mott - broadly regarded as one of the best banking analysts in Australia - has put out a report on the impact of Westpac's rate rise.

Mr Mott said the banks' interest rate decisions were "under intense political scrutiny" in Canberra.

He noted Mr Morrison has said that when banks offer short-term discounts to lure new customers, loyal bank customers are too often "left to foot the bill through higher interest rates".

 

The Australian Banking Association, led by former Queensland premier Anna Bligh, has criticised the government’s bank levy. Picture: Kym Smith
The Australian Banking Association, led by former Queensland premier Anna Bligh, has criticised the government’s bank levy. Picture: Kym Smith

If each of the big banks hiked their home loan rates, the government might return fire, Mr Mott said.

"If the major banks all reprice their mortgage books, one response from the government may be to increase the bank levy."

When he was treasurer in the Turnbull Government, Mr Morrison introduced a tax on the big banks that took effect in July last year.

The tax - a 0.06 per cent levy on the banks' liabilities - has been projected to raise $6.2 billion over four years.

It has previously been criticised by industry lobby group the Australian Banking Association.

After the levy was announced last year, association chief Anna Bligh, a former Queensland Labor premier, dubbed it a "poorly-designed tax grab".

Mr Mott pointed out that in the British government had hiked the UK bank levy nine times since it was introduced in 2011.

Shares in the big four Australian banks all surged after Westpac announced its rate hike yesterday.