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(generated from captions) Martha or Arthur most days of the week. Fraser Island, it's stunning. The federal government
is trying to win back voter support by dumping a proposed tax
on bank deposits. But the move has left a giant hole
in its budget. Assistant Treasurer Josh Frydenberg
joins me now from Melbourne. Good morning.

The bank deposit levy would have
raised $500 million a year.

We have the most profitable banks in the world here

in the world here in Australia. Why have you decided to drop it? How will you fill that budget gap?This was bill's bank tax. It was announced by the Labor Party just two days before the last election was called a. We were told by the banks and by consumer groups that this would be passed on to people who had deposits in banks and elderly Australians would have been most affected by that as well as regional banks. So we culted wildly, we set up a system inquiry. He told us this was not the way to go. We have decided to remove this bank tax.Because, the logic behind it was if the banks needed to be bailed out, like they did after the global financial crisis, sort of government had to come in and guarantee xofts that this would build up a fund to bail banks out. How are you going to bail them out in the future?Well, a number of countries wait until that event has occurred to decide what they actually need to do. The first call is what is left from a bank after it's collapsed. We have an obligation to guarantee all bank deposits up to $250,000 per account holder per financial institution. That guarantee remains. But by putting this tax on people's bank Federal Governments, it would have just meant a hit on the average family. We weren't going to do that. Now it's up to the Labor Party to follow suit and dump this bad tax.Do the banks pay you for that guarantee?No, theyNo, they don't pay that guarantee. They are required to hold high levels of capital to balance off against their loans. What has happened recently is that the key Prudential has required more banks to hold more capital. That's one of the consequences of the global financial crisis where it was said that the banks didn't hold enough capital.A good thing too. There is a some criticism of the announcement of this issue. It was more about a show of unity for the prime minister, you can't blame people for being skeptical after all the leaks that have been coming out from you blokes over the last week or two.This is completely linked to our formal response to David Murray's Financial System Inquiry. We have already announced a number of measures that came out of that inquiry. This was now another one of those. More will be announced in coming weeks. We went through a very considered process. Jock Hockey consulted with the various groups, groups likes National Seniors made their opposition very clear. We have listened and acted. Now it's up to the Labor Party to see if they are going to continue with the bad tax. The media is targeting Joe Hockey saying he won't be treasurer at the next election. You are assistant treasurer, have you got eyes on the top job?No, I really enjoy working with Joe. I think he has done an outstanding job as treasurer. He has helped drive a economy...Where is all the pressure coming himYou see that on both sides of the political divide. We have to understand that we have got a job to do and that's to create growth in the economy, jobs and one of the real fault lines now in the parliament, Kochie, is on this China-Australia free trade agreement. Today's announcement by the premier of Victoria and the premier of South Australia, both Labor premiers who said that the China-Australia free agreement should be passed. And they join Bob Carr and Bob Hawke who said the same thing. It puts extra pressure from Bill Shorten and to support this free trade agreement.That was a very clever deviation to the free trade