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Budget in doubt as parties dig in on bank tax

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UPDATED | The passage of the state budget hangs in the balance amid a high-stakes game of chicken between the Government and the Legislative Council, with the state facing the prospect of the budget bill being rejected outright and the outside chance of an early election.

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After the Liberal Opposition late yesterday confirmed it would seek to remove Labor’s bank tax from the Budget Measures Bill, following a unanimous vote in an afternoon partyroom meeting, the Government today dug in on the measure.

“Quite frankly we are going to stick to our guns on this,” Treasurer Tom Koutsantonis told reporters this morning, warning the money bill had “constitutional protection”.

“So the Legislative Council can’t amend it – they can only make suggestions.”

He warned if those “suggestions” were rejected by the Government in the lower house the only way to stop the tax was to “block” the budget measures bill – “in its entirety”.

“That’s the question now for members of the Legislative Council,” he said.

The Opposition’s decision provides the impetus to do that, with Xenophon-aligned John Darley and two Family First-turned Australian Conservatives MLCs also pushing to scrap the tax.

Darley today was emphatic he would do “whatever it takes” to kill off the bank tax – even if it meant killing off the budget.

“None… absolutely none,” he said when asked if there was any chance of a backflip on his opposition.

“It’s very easy to bash the banks but if you haven’t got strong banking system, you haven’t got a strong economy.”

Asked whether the same critique should similarly apply to the Commonwealth tax upon which Koutsantonis’s measure was modelled – and which was broadly supported by NXT federally – Darley conceded: “I guess you argue that… but the Commonwealth Government guarantees for the banks.”

He warned Labor to “be very careful what you wish for” if they took the issue to an early election, suggesting SA Best’s support in the event of a hung parliament “will be determined by a number of things”, including the number of seats won, the statewide vote “and how we perceive the relative ability of either party to govern this state”.

The state’s constitution act holds that the Legislative Council “may not amend any money clause” but “may return [it] to the House of Assembly… with a suggestion to omit or amend [a particular] clause or to insert additional money clauses”.

“The Assembly may, if it thinks fit, make any omission or amendment, or insertion so suggested, with or without modifications,” the law states.

This is what happened when the Upper House opted to block the car park tax after the 2014 election.

But the Government maintains it is digging in its heels on the bank tax.

Australian Conservatives MLC Robert Brokenshire said the Government had to decide whether it wanted to “drop this one tax like they did with the carparking tax or do they want to ruin their budget?”

“That’s up to the Government,” he said.

“If the Government don’t change it, that will be on their head.”

But he refused to say whether he would reject the money bill in its entirety.

“One step at a time,” he said.

“You actually have to crawl before you can walk, and the first step here is to say to the Government: ‘The Legislative Council does not agree with your big bad tax slug.’

“It’s up to the Government… let’s see where it goes from there.”

His parliamentary colleague Dennis Hood went even further, saying: “We’re simply not prepared to see it passed [and] we’re prepared to have a showdown with the Government.”

“We’re going to do everything we can to defeat this tax,” he said.

He denied the move would set a precedent for future budget chaos, because “it’s very unlikely Labor and the Greens will have the numbers in the Legislative Council to block anything in the future”.

“It’s not our plan to disrupt the Government’s budget every single budget,” he said.

Liberal leader Steven Marshall today delivered his budget reply speech to parliament – under the watchful eye of Australian Bankers Association chief economist Tony Pearson, who sat in the public gallery throughout as Premier Jay Weatherill also continued Labor’s strident attacks on the character of the Opposition Leader.

Tony Pearson and Stephanie Arena from the Australian Bankers Association watch events in parliament today. Photo: Tony Lewis / InDaily

“The essential true character is one of weakness… because the Leader of the Opposition is anxious about his own weakness, he’s shifted his position,” Weatherill told parliament.

I said the bank had closed 21 branches… in fact, they’ve opened a new one – the Liberal Party of SA

When his rhetoric was questioned by an interjection from Liberal frontbencher Dan Van Holst Pellekaan, the Premier responded: “I’m talking about character… I’d be making a different speech if it was you, because you’ve got character.”

Weatherill – who last week noted that the tax’s major public opponent, Westpac, had recently close 21 branches in SA – joked that he had been “harsh on the banks”.

“I said they’d closed 21 branches…in fact, they’ve opened a new one – the Liberal Party of SA,” he said.

With the juvenile glee of a shameless populist, the Treasurer attacked the banks

In his budget reply, Marshall defended blocking the budget measure, saying: “With the juvenile glee of a shameless populist, the Treasurer attacked the banks.”

“He wants to raid them as though he has an automatic entitlement to some of their customers’ money.

“The bank liabilities to be taxed are the deposits made by hardworking mums and dads in South Australia. Even school savings, accounts of children, are not exempt from this, nor is the superannuation of grandparents trying to make ends meet in retirement… the Treasurer seems to think that he can put his hands in the pockets of anyone at any time he feels.”

He conjured the memory of Labor’s biggest episode of financial mismanagement, saying the party “has form with playing with people’s bank deposits and home loans”.

“This is the same shameful Labor Party that bankrupted the people’s bank, the State Bank,” he said.

Outside parliament, Pearson told media the Bankers Association was “here to monitor the debate in the SA parliament”, noting “the mood here in SA is that this is a tax on investment growth and jobs”.

“This tax is not about the banks – this tax is about the future of SA,” he said.

He argued an ABA survey and a Galaxy Poll published by NewsCorp at the weekend suggested “there’s been a very strong mood against this tax in SA”.

“The polling we’ve seen to date and our conversations with Australian businesses show people believe it will deter investment and growth and jobs in SA,” he said.

But a new Reachtel poll by The Australia Institute has muddied the waters, showing a split among respondents, with 41 per cent supporting the tax, 42 per cent opposed and 17 per cent undecided.

“I can’t comment on that specific poll, because I haven’t seen it, but the ABA will continue to monitor developments,” Pearson said.

“I’m here in person to certainly listen to the budget in reply speech but also the Premier’s response… we’re even-handed.”

Pearson, a former advisor to Joe Hockey, was asked about the charged political stoush, replying: “I’ve seen some parliaments in my day… it’s the typical rough-housing you see in parliaments around Australia.”

Koutsantonis this morning slammed Marshall as “the weakest Liberal leader in SA history”, saying he had “made a dramatic miscalculation in what he’s done”.

But while he talked down the prospect of the budget standoff prompting an early election, he refused to rule it our entirely.

“The constitution’s very clear – we have an election every four years on a fixed date,” he said.

“I think the SA public would view an opportunistic election like this very dimly.

“Ultimately it’s up to the Premier, but we have fixed terms and we have no plans to make this a special case.”

Treasurer Tom Koutsantonis briefly attended the Budget Reply speech, but left the chamber halfway through. Photo: David Mariuz / AAP

Despite the 2014 standoff over the carpark tax, the Treasurer said this week’s move destroyed “a precedent that has been in place since 1857, since we’ve had representative government in SA”.

“[Steven Marshall] is the first Liberal leader in the history of this state to block a budget measure… if he blocks a budget measure and insists on it, he changes the game forever,” he said.

“He’s basically saying he doesn’t think he can win the next election and he’s not interested in governing – he’s just interested in wrecking.”

Associate Professor of Law at the University of Adelaide, Matthew Stubbs, said the Constitution Act prevented the Legislative Council making amendments to money bills, but in practice government usually preferred to compromise in the House of Assembly rather than provoke a stand-off.

“It can suggest amendments to the Lower House,” Stubbs told InDaily.

“The Government, if it wished, could reject those amendments and keep pushing it to see if the Opposition has the courage to reject supply.

“More often, the Government will take the point and amend the legislation and send it back (to the Upper House).

“That happened with the car park tax in 2014 and I’m sure on other occasions in the past.”

With impeccable timing, the Bendigo and Adelaide Bank today announced it was jacking up its mortgage rates.

The Bendigo and Adelaide Bank is not liable for the bank tax, but with Labor attempting to place the banking sector as a whole in the Liberals’ corner, it was perhaps awkward timing to increase variable rates by 0.30 per cent for existing owner occupied interest-only customers and 0.40 per cent for existing investment interest-only customers.

Managing director Mike Hirst said “the changes reflect the requirement to meet the regulator’s expectations while responding to the ultra-competitive owner occupied mortgage pricing market for new lending”.

“When setting interest rates our bank needs to consider many factors and carefully take into account the needs of our stakeholders including customers, shareholders, staff, partners and the broader community,” Hirst said.

“We’ve tried to carefully balance the interests of our mortgage customers, those who earn money through deposits and those who invest in our bank, all while ensuring our pricing remains market competitive and provides the strategic springboard for accelerated growth.”

-additional reporting by David Washington

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