By Eric Johnston
TREASURER Wayne Swan has given the strongest indication yet that tough new global bank rules on liquidity and capital may be watered down to suit Australian financial markets.
Mr Swan said regulators including the Australian Prudential Regulation Authority had been working with the banks on modelling the impact of the new rules, which include requirements for banks to vastly increase their holdings of government bonds.
Australian banks have consistently argued they should not be hit with the tough rules on capital given that they did not get involved in the same behaviour that caused banks in Europe and the US to stumble.
''Countries like Australia understand that supervision was just as important as changes to regulations, and changes have to take account of different circumstances in different nations,'' Mr Swan told the National Press Club yesterday.
''I think that message has been taken into account and that's why the modelling has been done.''
Meanwhile, senior bankers have welcomed government moves to offer a tax break on savings, although the measure is expected to provide only a modest boost to deposits.
Brokerage Credit Suisse said last night that the new tax break would be ''a very marginal positive'' for banks as it translated to only a small lift to Australia's deposit base.
The government this week detailed plans to introduce a 50 per cent discount on interest income, a move expected to direct a greater proportion of savings into bank deposits - a cheaper form of funding for banks. Under current arrangements, interest income has the least favourable tax treatment of all asset classes: the entire return is included annually in taxable income.
The new concession, which starts from July next year, will also apply to interest from bonds and annuity-style investment products.
Commonwealth Bank chief executive Ralph Norris said yesterday the measure would help lift the national savings rate, which would provide a benefit for the economy.
The phased reduction of withholding tax had some advantages for offshore banks and funding, Mr Norris said.
''And I think from all of our perspective, having a more diverse availability of funding in the Australian economy is good for the economy,'' he said.
ANZ's Australian boss, Phil Chronican, also threw his support behind the move. ''It's a further boost to savings, which is in the interest of all Australians and will be of benefit to a large number of our customers.''
The Henry tax review argued that tax differences across investment assets could have a large impact on the allocation of household savings. In particular, favourable tax treatment of debt encouraged borrowing to invest in a rental property or shares. The Henry tax review found this led to investors taking on too much debt and distorted the rental property market.