Getty/ Stanley Chou

Treasurer Chris Bowen has confirmed plans to impose a 0.05% levy on bank deposits by 2016 for a “Financial Stability Fund” that will help it pay for any future bailouts.

The levy will apply to deposits of up to $250,000 and is expected to raise $733 million in its first 18 months.

The announcement came as the government revealed a Federal Budget deficit of $30.1 billion in 2013-14, up from the $18 billion it forecast in May.

Here’s what Bowen said:

Unsurprisingly, people in Australian banks would prefer that the taxpayer should provide the guarantee to protect savings.

When you look at the fact that the big 4 banks have made a profit of $92 billion collectively over the past four years, I think it’s appropriate that the government look at this 5 basis point levy and banks can decide on whether they want to take this out of profits or pass it on to the customer.

Labour built 4 pillars of the Australian financial system and now we’re building a roof in case of a rainy day.

Bank shares tanked on early reports of the bailout levy yesterday – especially when the first report put the levy at 0.5% to 1%.

Bowen said the government had consulted with the finance sector, and would work to ensure that the levy would not make small banks and credit unions uncompetitive.

He noted that the levy had been recommended by Australia’s Council of Financial Regulators, following an IMF review

“Mr Stevens, Mr Laker and Mr Medcraft are not regarded as radical or rash men,” he said, referring to heads of the RBA, APRA and ASIC respectively. “When they make a recommendation, the government should listen.”

Now read: The Australian Economic Nightmare In One Chart

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