PRIME MINISTER:
As you know, this is a Government which is focussed on jobs and growth every day, and the best way to promote jobs and growth is to get taxes down. That is why this Government is constantly on about lower, simpler, fairer taxes. This Government is constantly on about removing the bad taxes that the former Labor Government placed on our citizens. The carbon tax is gone. The mining tax is gone. Bill Shorten’s piggy bank tax is going.
Today, I can announce that the bank deposit tax – that the Labor Party announced and built into the Budget but never actually legislated – will not go ahead. So, the good news for the people of Australia today is that Labor’s bank deposit tax is dead. It’s very important that our banks are safe and secure and the best way to ensure that we have safe and secure banks is to have a very good prudential regulatory system, and that’s exactly what we have: we have a strong prudential system which means that our banks are about the safest in the world. The last way to make our banks strong, the last way to protect depositors, is to hit banks with more taxes. That’s the Labor way. It's not the Coalition’s way.
So, Labor’s bank deposit tax is dead. This is very good news for the people of Australia. That’s a $1.5 billion hit on the people of Australia that is not going ahead thanks to this Budget, thanks to this Government.
Of course, the contrast between this Government and the Labor Party couldn’t be clearer. We want lower taxes – Labor wants higher taxes. Labor, as you know, will bring back the carbon tax, bring back the mining tax, impose a super tax, bring in a negative gearing tax. Labor is on about higher taxes. This Government is on about lower taxes and today, yet again, we have delivered for the people of Australia: Labor’s bank deposit tax is dead.
Now, I’m delighted to be here with my friend and colleague, the Treasurer. The Treasurer has done an outstanding job, an absolutely outstanding job. A critical part of managing our economy is keeping taxes low. It’s removing bad taxes. It’s not proceeding with unnecessary taxes. That’s exactly what Joe Hockey has to his credit.
TREASURER:
Thank you, Prime Minister.
As you correctly said, we abolished Labor’s carbon tax, abolished Labor’s mining tax, abolished Labor’s unfair tax on motor vehicles around the FBT and today we are announcing the end of Labor’s bank deposit tax. It was a tax on savings. It was a tax that was going to affect everyone with a bank account. Now is exactly the wrong time to apply such a tax to bank accounts, when people are receiving lower returns than they may have expected in the past.
When Labor announced this tax on 2 August 2013, we expressed a deep degree of scepticism but accepted that it would have to be referred to a Financial System Inquiry were we to be elected. The Murray Inquiry made a recommendation not to proceed with Labor’s bank deposit tax, and they did so in light of the fact they were asking banks to significantly increase their capital. In the last few weeks, a number of banks have raised between $2 billion and $5 billion of new additional capital. They may need to raise further capital. Therefore, it is exactly the wrong time to proceed with this sort of tax. It is dead, this tax.
Importantly, now is the time for Labor to publicly declare that their own deposit tax is dead. They used this simply as a way of trying to fatten up the bottom line when they were in quite desperate straits. I have consulted widely across many stakeholders in relation to this tax, looked carefully at different options, but there is no good option. The only good option is to abolish the tax and not proceed with it. That’s exactly what we have done. It remains the case there is a government guarantee on bank deposits up to $250,000 per account, per entity. As the Prime Minister said, this tax was going to raise around $1.5 billion over the forward estimates.
Finally, I just say this: when Labor designed the tax, they failed to properly consult. As a result, this tax would have hurt – significantly hurt – smaller financial institutions. There was no fair way of implementing this tax and certainly in the light of the recommendations of David Murray’s Inquiry, we have decided to dump the tax forever.
PRIME MINISTER:
Ok, do we have some questions?
QUESTION:
On this bank deposits tax, my understanding was it was recommended by the RBA, Treasury and APRA, wasn’t it originally? If that is the case now you have told us you are not going ahead with it, what are you going ahead with to afford, say, bracket creep compensation?
PRIME MINISTER:
We have good banks. Good, strong banks with good, safe deposits are banks which are well regulated and we have an outstanding prudential regulator – one of the world’s best – which means that our banks are safe. We also know that the capital requirements have been improved in recent times. This is what keeps depositors safe. This is what keeps banks strong and this is in place. The last thing you do, if you want to strengthen banks, is whack them with another tax…
QUESTION:
[inaudible] by the RBA, Treasury and APRA, wasn’t it?
TREASURER:
At the time it was, but that was before the Financial System Inquiry, the recommendations made by David Murray to increase the capital requirements for the banks to ensure that they are unquestionably strong. The banks have now accepted that they have to increase their capital to meet the new targets from APRA. Therefore, to proceed with such a new tax would simply be about harming depositors and that’s why the original recommendation is no longer warranted.
QUESTION:
Mr Hockey, yourself and Mathias Cormann and I understand Josh Frydenberg have been arguing internally for this tax on the basis of revenue for some months. Is this in any way a reaction to pressure from the backbench which was against it and lobby groups like the ABA?
TREASURER:
Well, you’re wrong. You’re wrong. We have been actively consulting with a range of different people, including stakeholders, and formed the view after consultation some days ago. In fact, more than a week ago I spoke to the Prime Minister and said this is bad policy in light of the new capital requirements for the major financial institutions. There was no way of making this work that was either fair to depositors or fair to small institutions. There was no way of doing it and it was bad policy and we will not proceed with bad taxation policy.
QUESTION:
But you never argued for this on revenue grounds at all internally in the last two years?
PRIME MINISTER:
Just go back to what we said about this when Labor brought it in. We said this is a hit on depositors. We said it was a bank tax. Yes, we said that should we win the election it would go off to the Financial System Inquiry. The Financial Systems Inquiry duly reported. It said that in the light of other things that were happening to banks, this tax shouldn’t go ahead and now it’s dead.
QUESTION:
Prime Minister, if was it such a bad idea, why did you leave the revenue from it in the May Budget?
TREASURER:
I can answer that as well. Again, we further consulted with financial institutions about whether they were prepared to raise further additional capital. We have been doing that in a careful and measured way. Now, a number of the financial institutions have gone to market and raised significant amounts of additional capital – between $2 billion and $5 billion. They will be required by APRA over time to raise further amounts of capital to meet the new targets where they are unquestionably strong.
So, this has been a work in progress. We have consulted widely but, ultimately, it comes down to the fact that it’s a bad tax, it’s a Labor tax. Now Labor has to reject it. Labor has to emphatically say they are not going to proceed with it, otherwise it will be exposed for what was always the original intent from Labor – and that is simply to raise revenue from depositors.
QUESTION:
Prime Minister, where are you at on the competition law reform?
PRIME MINISTER:
Well, we will certainly be considering that in due course, but I don’t think anyone should expect the effects test to be something that goes before Cabinet today.
QUESTION:
Prime Minister, on the China Free Trade Agreement, Labor has called on the Government to sit down with it and try and work out differences and ACCI has today offered to broker a deal. Are you prepared to negotiate with the Opposition or is it a take it or leave it deal?
PRIME MINISTER:
What we can’t and won’t do is reopen the FTA. The FTA is concluded. We have got a very, very good deal here. As you all know, trade means jobs. More trade means more jobs. Freer trade means more jobs, and China has done a much better deal with us than it’s done with any other sophisticated large economy. This is a really good deal for Australia and already, even before the deal is implemented – even before the FTA is implemented – we are seeing a lot of new export success stories thanks to the successfully concluded negotiation.
Now, you can’t have the Labor Party on the one hand talking about the Asian century and on the other hand snubbing the most powerful country, the strongest economy in Asia, and yet, that's exactly what they're doing. At the moment, Bill Shorten is threatening to sabotage our country’s future by backing the union campaign – the utterly deceitful, xenophobic-at-best union campaign – against this FTA.
Now, I say to the Labor Party: there is nothing to negotiate. There is absolutely nothing to negotiate here. The Labor Party should stop listening to the CFMEU and start listening to people like Bob Hawke and Bob Carr. They know the truth. This FTA is overwhelmingly in Australia’s interests. This is our economic future and it must go through the Parliament unaltered as quickly as possible.
QUESTION:
Will China walk away from the deal if it doesn’t go through Parliament?
PRIME MINISTER:
We’ve dealt in good faith with the Chinese Government. The Chinese Government has dealt in good faith with us. Bill Shorten stood up and praised the Free Trade Agreement on the floor of the Parliament when President Xi was in our country and for him now to go to water on it because of his union masters – well, I just think it’s an utter failure of leadership.
QUESTION:
Prime Minister, what is your reaction to Peter Dutton and Bruce Billson saying that people who leak in your Cabinet should be punted? And then what is your reaction to Dyson Heydon not stepping down?
PRIME MINISTER:
Can I just say that I know that people in this building love insider gossip, but this Government is focused on the people of Australia and I’m just not going to get drawn into any insider gossip at all today.
In respect of the Royal Commissioner and the Royal Commission, today, it’s business as usual. Various union officials are being called. Rorts, rackets and rip-offs inside the union movement are being exposed. The tragedy is that from the word go, Bill Shorten and the union leadership has been trying to protect dodgy officials, dodgy deals and a dodgy business model. I think, really, again, Bill Shorten and the Labor Party should stop listening to the CFMEU and start listening to decent Labor people like Martin Ferguson who say that this Royal Commission is not a political plaything, it’s actually the key to better unions, more honest unions, and a better, more honest Labor Party.
QUESTION:
Prime Minister, do you think there’s any case for changing the effects test? Treasurer, same question for you.
PRIME MINISTER:
Look, this is obviously a recommendation that’s come out of our Competition Policy Review. We will be responding in due course to all of the recommendations. Let’s never forget that there is a lot happening already here. We have got a Grocery Code of Conduct which is now in place – a Grocery Code of Conduct that has some teeth. That’s something that’s there. It’s only just come into operation but it’s there. We have also done a lot to support small business with the biggest tax cuts in history for small business. That’s certainly dramatically boosted small business confidence. But we are committed to making our economy more efficient and obviously that's why we will carefully study the recommendations of the competition review and we will have more to say in due course.
QUESTION:
Just to clarify, Prime Minister, you said earlier it is not coming before Cabinet today, is that…?
PRIME MINISTER:
The effects test is not coming before Cabinet today.
QUESTION:
[Inaudible] presentation to Cabinet today, isn’t he presenting to Cabinet on this as requested on August 4 in Adelaide?
PRIME MINISTER:
There will be a discussion about the recommendations of the review – the Harper Review – but not the effects test. That’s something that we are still considering.
QUESTION:
Prime Minister, [inaudible] on Syria and what advice have you taken so far on that?
PRIME MINISTER:
Again, if we could go to the fundamentals: the fundamentals are that the world is confronted with a dreadfully evil – an absolutely dreadful evil. The consolidation of a terrorist state in eastern Syria and northern Iraq would be a catastrophe for the world, and every day we see more evidence of just how evil this death cult is – the executions, the beheadings, the crucifixions, the sexual slavery – almost unimaginable. A return to medieval horror. So it is absolutely vital that we, with our allies and partners, confront this evil. As I've said before, while the legalities are different, the moralities are the same, regardless of which side of the border you’re on. I don't want this decision to be made in the absence of a full briefing from the Defence Minister. The Defence Minister is out of the country. He’ll be back shortly and shortly thereafter we’ll make a decision.
QUESTION:
Prime Minister, [inaudible] referring to insider gossip a moment ago, but just to pick up a point that Peter Dutton made this morning about – as he said – Fairfax Media is engaged in a bit of a jihad against the Government. Do you agree with that characterisation?
PRIME MINISTER:
Again, I’m not going to get into all this insider stuff. Naturally, it fascinates the media but as soon as I start talking about it, you’ll say that the Government was distracted from its purpose and my purpose today is to end another bad Labor tax. My purpose today is to tell you that Labor’s bank deposit tax is dead and I'm going to be absolutely and utterly focused on that, if you don't mind.
QUESTION:
Mr Abbott, what do you make of Philip Ruddock’s observation that the US and Europe are failing to show the appropriate leadership on the Syria crisis?
PRIME MINISTER:
I’m in the business of encouraging people, not criticising them and certainly ever since this Government took office, we have been in the business of trying to be a very helpful partner, a very helpful friend. Wherever we turn in the wider world, we want to be a helpful partner, a trusted friend, and, in the Middle East, that means doing everything we reasonably can to assist the United States and our other allies to disrupt, degrade and ultimately destroy the death cult. So, I’m pleased that the US is continuing discussions with a number of countries, including Australia, about what more we can do to tackle the death cut. As far as I’m aware, European countries such as the United Kingdom, such as the Danes and the Dutch are looking to further step up their campaign against this death cult.
QUESTION:
Prime Minister, I’m interested in why you so often speak about the Labor Party, including the entire premise for this press conference. Are you concerned that they will be shortly be back in power?
PRIME MINISTER:
No, I am absolutely confident – I am absolutely confident, Chris – that this is a Government with a very strong record and a very strong plan. But you will, I’m sure, not be surprised if from time to time I mention our opponents because, at every stage, our opponents are attempting to sabotage the plan. We see the Labor Party attempting to sabotage the China Free Trade Agreement. We see the Labor Party attempting or at least conniving with people who want to stop the Carmichael mine going ahead. Basically, Labor’s political strategy at the moment is to protect dodgy union officials and appease the Greens. Now, nothing could be more calculated to damage jobs and damage growth than Labor's agenda.
QUESTION:
Mr Hockey, you said in the Murray Inquiry recommended against the bank tax. David Murray proposed an ex ante model, in other words collect this sort of thing if a bank went under.
TREASURER:
Post.
QUESTION:
Sorry, post. So you argued publicly in an interview with us before the Budget that that was a bad idea and it should be collected before if you were to do this. Are you now saying David Murray was right?
TREASURER:
Well, I'm happy to send you the transcripts of my interviews with journalists. On 3 August 2013 – Journalist: "Will the Coalition keep the bank levy? Hockey: “We are going to properly consult with individual banks, for example smaller banks have a major issue with the levy, larger banks don't want because people gravitate their savings towards the bigger banks at any rate…” 4 August, in an interview with Jessica Irvine I said similar things, referred to the fact that we are going to have a Financial System Inquiry. In relation to MYEFO in December 2013, we referred to the fact that we would consider the Financial System Inquiry. December 2014, recommendation six said "Maintain the ex post funding structure of the financial claims scheme. The inquiry further noted that the recommendations about increasing capital were the main contribution”.
Now, we have been in the process of implementing that. APRA, after I consulted with them after the Budget, decided that it was appropriate that they then set a new target level for bank capital, that’s after the Budget. If I had have flagged it beforehand, obviously these are market sensitive announcements particularly when they involve billions and billions of dollars of funds to be raised by the banks. I have consulted with all the CEOs of the banks. I put to them a different proposal in relation to the bank levy and they put good arguments as to why it should not proceed.
I did what was expected of a Treasurer, which is to properly consult with all the stakeholders and, as a result, made a recommendation to the Prime Minister and the Cabinet that it not proceed. Now, the challenge is for Labor. The only reason they would keep it is they want to gouge the deposits of everyday Australians. It was their proposal. They announced it as a savings measure on 2 August 2013.
The pressure is on Labor now.
They should accept the recommendations of the Financial System Inquiry. Chris Bowen has said that he supports the new capital rules. You can’t have it both ways if the banks are prepared to increase their capital.
PRIME MINISTER:
Thank you, we have to go back to Cabinet. Thank you so much.
[ends]