The government has hit back at Ken Henry after the NAB chairman and former Treasury secretary lashed the government's $6.2 billion bank levy and criticised its lack of consultation with the banks.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
In comments published on Tuesday, Dr Henry said the new tax on Australia's big four retail banks and investment giant Macquarie Bank was a burden on their capital reserves, and the government should be honest about the cost being passed onto consumers.
Prime Minister Malcolm Turnbull told ABC radio the banks should not pass the extra costs onto customers.
"He knows as well as I do that the banks can well afford to pay this," Mr Turnbull said.
"I can see there's obviously complaints about it from the big banks - you'd expect that - but it's very similar to levies of this kind in other countries."
Trade Minister Steve Ciobo said Mr Henry's criticisms were unfounded and the banks had more than sufficient cash buffers to absorb the costs.
"Ken Henry is certainly well-intentioned. However, he's also not infallible," Mr Ciobo told ABC radio on Tuesday morning.
"Ken Henry, of course, designed the first iteration of the mining tax, which would have seen taxpayers refunding coal miners and iron-ore miners for losses in recent years, so I think there's some policy work historically that hasn't been ideal."
Mr Ciobo said the five banks had enjoyed substantial profits and were being asked to make a "modest contribution" to the government's effort to return the budget to surplus, which he described as pragmatic in the face of the Senate's opposition to spending cuts.
"Big bank boss Ken Henry says, 'don't have us pay more tax'," Treasurer Scott Morrison said.
"It is hardly a surprising headline. Ken Henry is welcome to his view but Australians know the very modest levy we put in place on the banks is a fair levy."
The ability of banks to respond to future fast-moving financial shocks could be undermined by the government's $6.2 billion bank tax, several of the country's largest lenders have claimed.
In submissions to Treasury reported by Fairfax on Monday, banks argued the budget's levy would work against efforts for lenders to build up more liquid, or easy-to-sell assets, designed to help banks cope through a period of turmoil.
Also on Monday, ANZ Bank's chief executive Shayne Elliott told a shareholder conference it was "largely a nonsense" to say banks could "absorb" the levy, as the government has argued.
"Without action on our part, this is a tax on you - our shareholders," he told the Australian Shareholders Association.
Dr Henry, who advised Australian governments for three decades, told The Australian Financial Review the bank tax was "very hurriedly put together" and called for a review of the financial system.
The Australian reported that Dr Henry was demanding a full public inquiry into the new levy.
Opposition Leader Bill Shorten backed an inquiry, saying Labor wants "to make sure the belt and braces are there, to make sure the protections are there".
"Financial institutions have been given two business days to consult before the legislation is rushed out," he said. "What has come out of the consultation is that it was very hurriedly put together."
