2015 Budget: Hockey sidesteps the deposit levy issue

Treasurer Joe Hockey has failed to clarify the Government's position on the deposit levy. The banking industry will have to wait until the Government makes its response to the Financial System Inquiry.

The levy was announced by the previous Government in a pre-election economic statement in August 2013. Labor 's plan was to establish a Financial Stability Fund to meet any costs of the Financial Claims Scheme. The fund would be supported by a 0.5 per cent tax on protected deposits.

The arrangement was scheduled to start in 2016.

Budget Paper No.1 says: "From 2016, subject to the Government's response to the Financial System Inquiry, any payments under the Financial Claims Scheme relating to ADIs would initially be met from the Financial Stability Fund announced in the 2013 Economic Statement.

"In this case a levy could be applied to ADIs."

The Financial System Inquiry has recommended against the levy proposed by Labor, arguing that it is preferable to impose a levy if the Financial Claims Scheme is triggered and insufficient funds are recovered through liquidation of assets.

The Budget Paper does not actually specify which form of levy it is referring to when it says "a levy could be applied".

The Customer Owned Banking Association called on the Government clarify the issue by ruling out the 0.5 per cent levy.