Deposit fee not a tax, says Swan

Federal Treasurer Wayne Swan says a fee charged for bank deposits of more than $1
million should not be considered a tax, but a commercial reality.
The government has yet to decide whether it will be the depositors or the banks that
will have to pay the fee as part of its package to guarantee all bank deposits.
The fee would be paid on all deposits over $1 million in the deposit-taking
institutions that were regulated by APRA (Australia Prudential Regulatory
Authority), "and the fee will be either paid by the depositor or the bank," he told
parliament.
"It is not a deposit tax, it is a fee to reflect a commercial reality."
Opposition treasury spokeswoman Julie Bishop disagreed and accused the government of
"bungling" the introduction of the guarantee.
"The announcement of this new bank tax will cause significant confusion and
uncertainty in the financial markets," Ms Bishop told reporters.
A sometimes heated Senate hearing was told by Secretary to the Treasury Ken Henry
that he and Reserve Bank of Australia (RBA) Governor Glenn Stevens were of "one
mind" over the introduction of a deposit guarantee.
An article in The Australian newspaper on Tuesday said the government had ignored
the RBA's strongly voiced concerns about the impact of an unlimited guarantee scheme
in its rush to announce the scheme.
"I have seen that article ... the article is just plain wrong, and it's not
helpful," Dr Henry told the hearing.
Liberal Senator Helen Coonan interjected saying that it may it not be helpful, "but
it may be right."
"The members of the committee may think that's a matter of some mirth ... The
Australian newspaper has not handled these issues particularly well," Dr Henry said.
"The story on the front of yesterday's Australian newspaper was wrong, spelt
W-R-O-N-G."
But it was also revealed that the Treasury did not do any economic modelling for the
$10.4 billion economic stimulus package, drawing the accusation from the opposition
that it was "policy on the run".
The package will provide one-off payments to pensioners, carers, and low-income
families, and increase the First Home Owners Grant until the end of June.
"There was no formal modelling done of that package, there was certainly analysis
done of that package, but it was ... not formal modelling," Treasury's executive
director of the macroeconomic group David Gruen told the hearing.
Nationals senator Barnaby Joyce asked Dr Gruen whether that was prudent when
spending half of the nation's budget surplus.
"With the best will in the world, it is extremely difficult for formal models to
come to terms with such events," Dr Gruen said.
"It's a situation which calls for judgment rather than, I think, formal modelling."
He said the size of the package was for the government to choose and implement, and
not for Treasury to come up with the numbers.
Senator Joyce said it was quite obvious the $10.4 billion figure was "plucked out of
thin air".
Treasury is currently finalising its forecasts for the Mid-Year Economic and Fiscal
Outlook (MYEFO) which will be released next month.
Dr Gruen said developments in the global financial crisis had been so rapid, the
Treasury had not adjusted its forecast for economic growth since September.
"We could have locked ourselves in a room with our September forecasts and the new
information that had accumulated since they were finalised and spent two or three
days coming up with a coherent set of new forecasts," Dr Gruen said.
"Had we done so, however, it is clear that international events were moving so
rapidly that, when we emerged from that hypothetical room after a couple of days, we
would have wanted to rip the forecasts up and start again."
As it stands, its last GDP forecast for 2008-09 made after the June quarter national
accounts that were released in September had a "two" in front of it, compared with
2.75 per cent at the time of the May budget, he said.