Treasurer Chris Bowen and Finance Minister Penny Wong have confirmed the introduction of a levy on bank deposits, which the ABA says could spell the end for near-future interest rate cuts and could hit mortgage holders in the pocket.
The policy, which will see a 0.05% levy on bank deposits up to $250,000 and will be collected from January 1, 2016, is forecast to raise $733 million in its first 18 months, according to ABC reports.
ABA CEO, Steven Münchenberg, told reporter Simon Cullen the cost to banks will likely be passed on to mortgage holders.
“The problem will be that if we don’t pass it on to those customers with savings, then it will increase the funding costs of banks because we are largely funded through deposits. So if we’re having to pay more for those deposits because of this levy, there is a possibility that it’ll be passed on to borrowers.”
The Treasury maintains, however, that the levy will protect ‘mum and dad investors’ in the event of another bank collapse.
"It'll be quarantined from the rest of the budget and just put aside in case there's ever a need with a bank getting into trouble in Australia," Bowen tells Channel Seven.
"It hasn't happened in Australia for quite a while, but we can't be complacent…The Reserve Bank, APRA, ASIC have all suggested to us that this is a good idea. When they make a recommendation like this to government, government should listen."