The wagons have been circled. The barricades, um, personned. And, most of all, the high horses have been mounted. The Australian Financial Review is leading the fight against the Coalition’s new bank tax.
It’s quixotic at best. Parliament is in raging agreement about it. There’s no opposition ready to go into bat for the sector, as Tony Abbott’s Liberals did against the mining tax. And people hate Australia’s banks much more than they hate the mining companies who fended off Labor’s attempt to impose a superprofits tax on them.
(By the way, it’s a sign of the Liberal Party’s changing priorities that it was willing to defend foreign mining company donors, which pay comparatively little tax, but now happy to go after locally owned company donors that pay a much higher level of tax).
But as Australia’s leading capitalist rag, the Fin is gearing up for a fight. Yesterday’s editorial threw the lot at the government: the new tax was a “populist whim” that reflected “a populist race to the bottom between Labor and the Coalition”. Today’s edition focused on the “embarrassing tax debacle” of the meeting between Treasury bureaucrats and bank CFOs to explain the tax; Treasury was “in the dark” on the tax, according to Tony Boyd, who broke the tax story over an hour before the budget lockup began on Tuesday, sending bank shares plummeting (Boyd’s source, and even whether there will be an investigation of that leak, remains unclear; his metadata is perhaps already being demanded by some clueless junior AFP officer).
If the result of this fight is going to be very different, the lines being aimed by the banks and its media supporters are very similar to those deployed by the mining companies, the Fin, News Corp and Business Spectator (as it was back then) against the mining tax. The process is shambolic and companies haven’t been consulted (methodological note: “consultation” in this context means companies tell the government what it should do and the government obeys unquestioningly). And the new tax will deter investors — the Fin has a line-up of business eminence greases to warn that it will “spook” investors. In the mining tax context, this led to Tony Abbott’s notorious 2010 claim that “now it is safer to invest in Argentina, in Tanzania, in Zambia, in Ghana and in Botswana than it is to invest in Australia”. Only problem was, Australia was rated the world’s top mining investment destination by a US mining analyst firm for four years under Labor, and then lost its top spot after Abbott became prime minister.
And there’s a phrase that was bandied around so much during the mining tax debate, usually by people who didn’t have a clue what it meant. Scott Morrison had “added to sovereign risk by endorsing the principle that any business impost is justified if it is politically popular,” the Fin opined yesterday.
Remember how the mining companies and their spruikers claimed during the mining tax debate that the sector had saved Australia during the financial crisis — one of the most blatant, and easily disproven, lies of the entire campaign? It’s baaaaaack! The banks “helped shield Australia from the global financial crisis”, according to the Fin. “Our AA-rated banks helped stabilise Australia’s economy during the GFC.” That would be why the Rudd government had to guarantee bank deposits and the banks’ wholesale funding in October 2008. And while the Fin might think we should be grateful to the big banks for sparing us the fate of Greece (to which Tony Abbott frequently compared us), the big banks continue to enjoy a significant advantage from the implicit government guarantee that remains embedded in the Australian financial system.
And just in case you might think — as the head of ANZ candidly admitted yesterday — that the banks have brought this on themselves by their poor behaviour, the Fin has a response for you as well: you’re just “magnifying some non-systemic consumer banking misbehaviour into a systemic problem with our banks”. Sorry Stutch, but the Reserve Bank disagrees: in 2015 it dismissed the “few rotten apples” line and specifically warned about bank culture:
“Conduct-related events in one area of a banking group may be a signal of broader governance, cultural and risk management deficiencies, and could give rise to entity-wide reputational risks.”
Non-systemic? Dream on.
Not that the government isn’t being wildly inconsistent. On the one hand it is insisting corporate tax cuts are needed to drive business investment. And it specifically ruled out exempting the banks from its company tax cuts in February. “The company rate has really got to go across all corporations. Distinguishing between one sector and another is not a practical measure. I’m not aware of that ever being done in any other jurisdiction,” Malcolm Turnbull said in February. Yet here it is taking $6 billion over four years away from the banks while committing to gift them $7 billion in company tax cuts over a decade.
Interestingly, amid all the literature which demonstrates that company tax cuts do not generate any of the increases in investment, employment, productivity, wages or economic growth that advocates allege, there is some evidence that if you increase company tax rates, that acts to deter investment.
Still, like the mining tax debate, this isn’t a debate overly troubled by facts.