Australia unveils levy on bank deposits

Australia bank notes Many leading Australian banks have criticised the move

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Australia has unveiled a levy on some bank deposits to raise money towards a fund aimed at safeguarding against a banking collapse.

Deposits up to A$250,000 will have to pay a levy of 0.05% from January 2016.

It will be imposed on banks and not account holders. But banks have warned costs may be passed on to customers.

The move comes as the government warned of slower economic growth and a much bigger budget deficit than it had previously forecast.

In its updated economic statement, released by Treasurer Chris Bowen, the government said it expected a deficit of A$30bn ($26.7bn; £17.8bn) in the current financial year, compared with its previous projection of A$18bn.

'Not a crisis'

Australia's economic growth over the past few years has been powered mainly by the success of its resources sector.

Start Quote

Australia is undergoing an economic transition”

End Quote Chris Bowen Treasurer, Australia

Demand from countries such as China resulted in a commodities boom - which helped sustain the country's growth through the global financial crisis.

However, growth in those economies has slowed recently, driving down demand for commodities as well as their prices.

That has not only affected Australia's economic growth but also hurt the government's tax revenues.

On Friday, the government lowered its growth forecast. It now expects the economy to grow by 2.5% in the current financial year, down from its previous projection of 2.75%.

It warned that slowing economic growth was likely to result in a rise in unemployment.

"Australia is undergoing an economic transition. Not a crisis, but an economic transition that needs careful economic management," Mr Bowen said.

"This transition has been brought about by the China mining investment boom coming to an end."

He added that as expansion in the mining sector slows, "non-mining sectors of the economy will need to lead growth in future".

Revenue shortfall

The government said that the faster-than-expected drop in commodity prices, coupled with other factors such as lower growth in wages, would also hurt its revenues.

It has forecast a revenue shortfall of A$33.3bn over the next four years.

The government has announced new measures in an attempt to boost its revenues.

This includes a tax rise on cigarettes. Prices will rise by 12.5% a year for four years starting from 1 December.

The government said it expected to raise A$5.3bn from the increase.

It also announced changes to a fringe benefit tax applicable to cars, which it said would help raise another A$1.8bn.

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