Economist and former Rudd Government advisor Andrew Charlton said there was some solid economics behind the levy.

“There is no question that it is a grab for cash but this is not an unusual tax around the world,” he said.

“The UK has a bank levy which is 8 basis points and they have two benefits to financial stability and competition.

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“First, because it’s applied to the biggest banks it helps to rebalance the market, and secondly because it applies inter-bank funding it encourages banks to fund themselves through more stable and less risky sources.”

As well as the bank levy the Government has announced a raft of measures designed to rein in bad bank behaviour.

It includes setting up a “more accessible and more affordable one-stop shop” for bank customers to resolve disputes with financial institutions, which will be called the Australian Financial Complaints Authority.

All senior bank executives will have to be registered with banking regulator APRA and if found in breach of a yet to be set up “Banking Executive Accountability Regime” they can be deregistered and disqualified from holding executive positions, and stripped of their significant bonuses.

There are also more hefty fines for bank bad behaviour starting at $50 million for small banks and $200 million for large banks.

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