Banks may pass on new government deposit levy to mortgage holders

The federal government has announced that it will charge a 0.05% levy on bank deposits up to $250,000 from January 1 2016.

The levy will be charged to the banks - not savings account holders - but the banking industry has already indicated that costs will be passed on to bank customers.

The Australian Bankers Association hit out at the levy with chief executive Steven Munchenberg calling it “unnecessary” given that Australia has one of the safest banking systems in the world.

Munchenberg told ABC News there was a possibility the levy would be passed on to borrowers

“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,” he said.

The announcement of the levy was made by federal treasurer Chris Bowen, who said the money would go into a Financial Stability Fund to be used in the event of a bank collapse to protect mum and dad investors.

“It'll be quarantined from the rest of the Budget and just put aside in case there is ever a need with a bank getting into trouble in Australia - bank, a building society or a credit union,” Bowen told 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."

It is forecast to raise $733 million in its first 18 months – the money will be counted as revenue in the budget.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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