Finance Minister Nicola Willis has defended a new $200 million prudential levy introduced in Budget 2026, describing it as a “fairness measure” designed to ensure financial institutions contribute directly to the costs of their own regulation. The levy, which applies to banks, non-bank deposit takers, insurers, and other financial market participants, represents one of the few revenue-raising initiatives in the government’s final budget of the current parliamentary term.
Speaking on Q+A with Jack Tame, Willis argued that the levy is “tiny” in proportion to bank profits—amounting to less than 1%—and stated that it would be “extremely unwise” for banks to pass the associated costs onto their customers. Willis maintained that the sector has the capacity to absorb the expense, noting, “They make extremely solid margins. Those margins seem to survive whether the economy is going up or it’s going down.”
.jpg/166px-Nicola_Peltz%2C_2012_(soft_contrast_crop).jpg "Nicola Willis Q+A interview")
The move has faced pushback from ACT leader David Seymour, who argued that it is inevitable that costs will be shifted to consumers. “So let’s not tell the easy lie that we would be taxing the banks, you’d be taxing their customers,” Seymour said. Willis rejected this framing, emphasizing that the current system sees ordinary taxpayers funding regulatory services through general taxation.
Implications and Regulatory Oversight
The government has not yet determined what specific actions it might take if banks choose to pass the levy on to customers. When pressed on the tools available to prevent such an outcome, Willis pointed to consumer competition as the primary check, suggesting that if customers see extra charges, “they should shop around.” She added that the Reserve Bank would monitor pricing and that the government could utilize transparency regarding market developments.
Regarding potential future steps, Willis indicated that further action on bank taxation remains a possibility if banks were to pass the levy on simultaneously, though she offered no specifics beyond noting she is “looking very carefully at the taxation of banks as a whole.”
Budgetary Context and Fiscal Record
The interview also addressed the government’s broader fiscal position. Willis defended the forecast return to surplus in the 2028/29 financial year, a target that has slipped from the 2026-27 goal established during the 2023 election campaign. She attributed the discrepancy to “wildly optimistic” pre-election forecasts from Treasury.
Addressing concerns over government borrowing, Willis acknowledged that the state is averaging more than $17 billion a year in gross debt, which she attributed largely to a $9 billion annual interest bill. “That’s more than four times the discretionary spending I’m doing in each Budget,” she said. Net core crown debt is forecast to rise by $91 billion over the current projection period, with Willis stating that debt is expected to stop growing by 2027-28 once the books return to surplus.
