In a policy proposal similar to those offered by Pauline Hanson, the Citizens Electoral Council and the newly-formed (but equally loony) Bank Reform Party, the Greens are calling for a new tax on Australia’s big four banks ( TT yesterday: The Greens Plan For Australia’s Future ).
Under the Greens’ plan, ANZ, Westpac, NAB and Commonwealth Banks would be subject to a tax above and beyond corporate tax, with the funds raised given to the unemployed and retired.
It’s crazy economics. More than that, it’s damaging to Australia’s reputation as a global banking hub, and completely ignores the role of those banks in our society.
Let’s look at the Commonwealth, which was privatised over 20 years ago.
The Commonwealth employs 45,000 Australians, who are collectively paid more than $5 billion each year (that’s about the same as the Tasmanian State Budget).
The bank isn’t owned by some faceless Fagin character – over half the capital is shared between around 800,000 individual Australians. Retirees, mums and dads, investors. Another 3 million Australians hold shares in the bank through their superannuation.
The bank pays around $5 billion each year to those shareholders. Disproving the Green notion that the banks aren’t paying their way, Commonwealth paid $3 billion in company tax last year, plus hundreds of millions in payroll tax to the states. Another $100 million went to charitable foundations.
Those canny investors who picked up shares in the original float have seen their wealth grow over 2000 per cent in 22 years. That’s ordinary people, who invested to fund their retirement, educate their kids, or simply have a nest egg for the future.
But to the Greens, it seems all those facts can be ignored.
The Commonwealth is just one of the four big banks. It isn’t clear why the Greens have singled out the banking sector for their attack on private enterprise. Certainly other sectors in the economy are more profitable.
Commonwealth’s return on equity is around 18 per cent. Supermarket and gambling giant Woolworths, a company with dubious social credentials, trades on ROE of 27 per cent. And Wotif.com, founded by Greens donor Graeme Wood, enjoys a ROE of 57 per cent. Yet we don’t see the Greens supporting an extra tax on gambling companies, or online booking agencies. Yet.
If the Greens are so bereft of useful economic policies, here’s a couple to get them thinking.
1. Scrap the GST exemption for imported food. Not only would this help make domestic producers more competitive, it would provide a financial incentive for households to buy Australian, rather than the $10 billion in food we ship from overseas annually.
2. Scrap all forms of middle class welfare for families earning over $250,000. If pension and newstart rates are too low (they are), it’s because an increasing proportion of our $140 social security spend is going to relatively wealthy people.
3. Tighten access to free medical treatment. Families earning over $250,000 should be able to afford private health insurance. Enforce it.
Those concepts might not be palatable to some. They might even not work. But they are worth considering. Unlike silly, populist attacks on some of Australia’s most successful companies.
Tom Ellison is a financial analyst and writer who consults to both private and government sectors. His decision to stand as an Independent for the Federal seat of Bass arose from a desire to offer voters an alternative to the major political parties, and their associated shallow rhetoric, populist economic values and absence of forward-thinking policies. Tom supports the development of Tasmania as a leader in the fields of education, renewable energy technologies and sustainable small business.
