Australia is on the verge of instituting a tax on bank deposits that will certainly hurt the average consumer, retiree and saver. Australia Treasurer Joe Hockey is proposing a 0.05 percent tax on deposits of up to $250,000 as part of efforts to raise $500 million for the bank deposits insurance fund.
The nation’s biggest banks have already conceded that the costs will be passed onto consumers in the form of higher account fees and lower interest rates, according to News Australia. The Commonwealth Bank of Australia has come out publicly rejecting such a deposit tax, while other financial institutions have also chastized the idea.
Even credit unions are coming out against the proposal. The Customer Owned Banking Association, which represents credit unions and building societies, argued it would hurt smaller banking entities.
Overall, the Australian Bankers Association (ABA) believes it’s a bad policy being put forward. “Millions of Australians, including many self-funded retirees, rely on their savings to fund their current and future prosperity and they should not be punished by a new tax,” ABA chief executive Steven Munchenberg said.
What’s interesting about this proposal, too, is that when it was first floated around by the former Labor government, Hockey was adamantly opposed to the initiative. Now he has done a complete 180-reversal and fully supports it.
“This is part of the frustration of partisan politics: the other mob come up with a tax idea and then we get blamed for implementing it,” Hockey told reporters (via Sydney Morning Herald).
Will the U.S. adopt this policy?
This move has surprised many because Australia is known to have a solvent, sound and dependable banking system, much like Canada. Banks in the Land Down Under maintain sturdy capital ratios, liquidity rates and capital numbers. Overall, the Australian finance sector is stronger than the United States, European Union, Greece, Spain, Cyprus, Slovenia and the list goes on.
When looking at the U.S., there is no doubt that the federal government would impose such a levy. U.S. banks are illiquid, high-risk and CEOs continually place customers’ deposits in harm’s way.
Meanwhile, the Federal Deposit Insurance Corporation is another insolvent, high-risk fund. According to a Government Accountability Office (GAO) report, the FDIC maintains $60 trillion – that’s right, $60 trillion! – in liabilities. If a bank were to go bust then how could depositors be protected in any situation? This is another reason to abolish the FDIC because not only is it bankrupt but it has produced an array of moral hazards.
The White House and the Federal Reserve have regularly intervened in the overall banking system and Wall Street, whether it’s bailouts, stimulus, regulations and limitations. If Australia, a beacon of a well-capitalized banking infrastructure, is on the cusp of undertaking bank deposits then why should anyone think the U.S. wouldn’t mimic their actions?
Be prepared for haircuts and deposits all in the same of financial security and self-sacrifice.
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