IMF levy and tax proposals – unwarranted for Australia’s solid banks  

Sydney, 22 April, 2010: The Australian Bankers’ Association (ABA) said the International Monetary Fund (IMF) proposals recommending that financial institutions pay fees to cover the cost of any future bail outs could weaken our banking sector and slow Australia’s economic growth.

The IMF proposals are contained in a leaked document titled "A Fair and Substantial Contribution by the Financial Sector" which was obtained by some media outlets. The proposals include a flat levy on financial institutions and an extra tax on their profits and remuneration.

Australia’s solid and reliable banking system weathered the global financial crisis (GFC) and continued to lend to businesses, underpinning Australia’s economic growth. This is in stark contrast to the overseas experience in the US, UK and parts of Europe where some banks collapsed, others were nationalised and economies experienced sharp downturns resulting in recessions.
 
The ABA believes that the IMF approach is unwarranted in Australia.

Steven Münchenberg, Chief Executive of the ABA, said: “I think what we are seeing is domestic politics in the US, UK, France and Germany being exported onto the international stage. Those countries had real problems; they had to use taxpayer money to bail out their banks, unlike Australia, unlike Canada and other countries. Now they’re exporting their pain around the world.”

“Taxpayer money was not used to bail out Australian banks. In fact, Australian banks and other lenders have so far paid around $1.1 billion for the use of the Government’s wholesale funding guarantee and will pay more than $5 billion over its full life.”
 
“I do not believe that our Government would undermine our economy by agreeing to add unwarranted taxes on the solid, reliable Australian banking system.”

Media reports state that these proposals will be discussed tomorrow at the Group of 20 finance ministers meeting in Washington which Treasurer Wayne Swan is attending.

Mr Münchenberg said: “I am pleased that the IMF document counselled against unilateral action by Governments and full uniformity as countries’ experiences differ as do their priorities, as they emerge from the GFC. I take this to mean that our Government does not have to agree to measures which would put a brake on our economic growth.”

For further information:

Heather Wellard, ABA PR, P: 02 8298 0411 M: 0409 830 439

ENDS