Cut tax on deposits: NAB
(30 June 2008 – Australia) National Australia Bank has suggested that cutting tax on bank deposits would encourage greater saving in Australia and thus relieve funding pressure.
NAB chief executive officer for Australia, Ahmed Fahour told an Australian debt markets conference in Sydney that the federal government should include a review of the deposits market in its overall review of the tax system.
Fahour said that measures to improve the attractiveness of deposits such as enhanced tax treatment would reduce bank reliance on overseas money.
Given the current worldwide credit crunch, funding and inter-bank borrowing costs have dramatically increased. An increase in deposits would thus reduce the need for overseas funding.
The benefit would be two-fold. Not only would Australians receive more money back from their deposits, but they would also have relief on interest rates. Interest rate reduction could be achieved through a reduction in bank costs being passed on and reduced spending causing the RBA to reduce rates.
This means banks will have a lower mortgage interest rate than what is prevailing at the moment, Fahour added.
Fahour also said that such a change would not have an impact on the managed funds industry, because the demographics investing in funds and deposits are different.
The tax system review is being conducted by Treasury Secretary Ken Henry, with findings to be released by the end of next year.
Fahour said that measures to improve the attractiveness of deposits such as enhanced tax treatment would reduce bank reliance on overseas money.
Given the current worldwide credit crunch, funding and inter-bank borrowing costs have dramatically increased. An increase in deposits would thus reduce the need for overseas funding.
The benefit would be two-fold. Not only would Australians receive more money back from their deposits, but they would also have relief on interest rates. Interest rate reduction could be achieved through a reduction in bank costs being passed on and reduced spending causing the RBA to reduce rates.
This means banks will have a lower mortgage interest rate than what is prevailing at the moment, Fahour added.
Fahour also said that such a change would not have an impact on the managed funds industry, because the demographics investing in funds and deposits are different.
The tax system review is being conducted by Treasury Secretary Ken Henry, with findings to be released by the end of next year.
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