ACT Party might be biggest hurdle to mooted bank levy
Friday, 17 April 2026
ANALYSIS: April is the month before the Budget when big plans can be made behind closed doors in Parliament.
Three years ago Labour hatched and then abandoned a plan to introduce an annual wealth tax on people with assets of more than $5 million, all in remarkable secrecy.
But sometimes clues about flagship policies get dropped along the way.
Last year Finance Minister Nicola Willis was quietly putting the finishing touches on her $6.6 billion Investment Boost Budget policy in a bid to boost economic growth.
Read more:
Is Government considering a tax on excess bank profits, in disguise?
Investment Boost emerges as possible fault line in run-up to Budget 2026
That didn’t come out of the blue, though. Speculation had been building ahead of the Budget that something of that nature might be in the wings.
There has been persistent chatter that one of the highlights of this year’s Budget on May 28 could be a raid on the banks.
In July last year Willis revealed she had asked officials to consider the way banks were taxed in New Zealand, including “looking at issues such as the Australia major bank levy, which is something that we don’t have here”.
She indicated that if the Government did introduce a similar levy, no announcements would be made until the coming Budget.
What would we be talking about here?
The Australian levy is a 0.06% annual tax on the value of bank deposits (and a few other things) that was introduced by then Australian treasurer Scott Morrison in 2017.
That’s a small rate of tax on a huge pot of money, and the levy raised about A$1.7 billion (NZ$2b) last year.
Britain, Belgium, Holland and Slovenia have broadly similar levies, while some other EU countries including Spain and Italy have what could be more easily described as less subtle taxes on excess profits made by the banks.
The justification for the Australian levy was ostensibly that there was an unwritten assumption that the Australian government would need to bail out any of the country’s biggest banks in a financial crisis.
Given the big banks were “too big to fail”, a levy was an appropriate way for the banks to chip in during normal times to cover the costs of any future bank failure.
What are the arguments in favour?
The Treasury is expected to report in the Budget that the Government’s fiscal outlook has deteriorated as a result of fallout from the Middle East conflict.
The big four banks reported profits totalling about $6.5b last year and a bank levy could be one of the least unpopular ways to deliver some meaningful extra revenue.
That’s especially so given the Government has arguably made less progress than it would have liked and the public might have expected increasing competition in the banking, supermarket and electricity sectors.
The prevalence of similar taxes and levies overseas makes it harder to argue there would be any big hit to the country’s reputation as a safe place to invest.
This could be pitched as a populist policy that increased economic resilience and elevated the interests of Kiwis above those of the Australian-owned banks.
The argument against?
Consumers and businesses could feel the pinch if the banks had the market power to pass the cost of a levy through to them in the form of less favourable interest rates or higher fees.
Any threat of higher interest rates could be particularly problematic given the current concerns over a rise in inflation stemming from the Middle East conflict and the expected need for monetary policy tightening.
The technical arguments that were used to justify a levy in Australia might sit uneasily with the Government’s decision here to put the brakes on a tightening of bank capital rules that would have made bank failures less likely in the first place.
The banks are now separately being tapped to fund the Depositor Compensation Scheme, which is intended to insure bank deposits and reduce the impact of any failures.
Any sum the Government could realistically extract from the banks might also only make a difference at the margins to its fiscal forecasts — compared, for example, to a dressing up of ACC’s financial forecasts — so might be viewed as not worth the bother.
So what are the odds?
Hard to say. Maybe 50:50.
Bank industry insiders report that they haven’t heard much about the possible levy of late, but given this would be a political, Budget initiative that may not mean much.
Much may depend on coalition politics. It is safe to assume Willis wouldn’t have raised the possibility of a bank levy if she hadn’t thought it might be a winner.
She tells The Post: “As previously discussed, the Government has an ongoing work programme to improve competition, including in the banking sector. We want to ensure New Zealanders get a fair deal from banking services.
“This work is wide-ranging and I have sought advice on whether major banks are paying their fair share of tax. For example and as previously stated, Inland Revenue has been consulting on whether banks operating in New Zealand can shift some of their profits out of New Zealand.”
That profit-shifting work is an adjacent, more minor issue, just to be clear.
“The work programme is ongoing. No decisions have been made. It is therefore not appropriate to get ahead of Cabinet,” she says.
“I note that banks already pay the Financial Markets Authority Levy and will begin to pay the Depositor Compensation Scheme Levy from this year.”
The ACT Party would presumably want its own pound of flesh in the form of fresh public sector spending cuts if another, broader bank levy was something it was going to entertain.
Seymour tells The Post that copying the Australian levy is “an interesting possibility”.
“But I follow the mantra of Nicola Willis. Deficits are not a revenue problem, they’re a spending problem.
“The Government should get back to surplus by managing its spending rather than finding new ways to tax people. Everybody knows taxing banks is taxing people who keep their money in banks.”