BANK deposit holders including self-funded retirees will face a new tax of up to $150 a year as the government raids people's savings to help plug its budget black hole.

The new levy on deposits of up to $250,000 will apply from 2016 as an insurance fund to replace the government guarantee to protect account holders from the risk of a future banking collapse.

Almost $4.5 billion was wiped from banking stocks yesterday on speculation the levy, which today will be confirmed as a 0.5 per cent deposit insurance levy to be imposed on banks to build a $733 million insurance fund to protect account holders, who have $600 billion in funds deposited in banks and credit unions.

According to briefing notes on the proposal levy released last night, the cost to average deposit holders with $10,000 in savings would be $6 a year if banks passed on the cost of the new tax. This would rise to $150 a year for those with accounts of up to $250,000.

The levy would replace, over time, the government guarantee initiated during the global financial crisis for accounts of $250,000 or less to protect against the collapse of a bank or credit union during a future financial crisis.

Government sources said the funds would not be booked as revenue and would go into a Financial Stability Fund, backed by the Reserve Bank and the International Monetary Fund and recommended by the Council of Financial Regulators.

However, it would appear in the plus column of the government's balance sheet, helping the collapsing budget bottom line.

The bank tax will form part of the government's economic statement to be released today in which Treasurer Chris Bowen is expected to announce a further round of budget cuts - of up to $8 billion - to meet the budget surplus promise for 2016.

Mr Bowen said the levy would be a fraction of the cost of the 1.5 per cent levy the Coalition would impose on banks to pay for its Paid Parental Leave Scheme.

The government will argue Australia is one of the few G20 countries not to have a "pre-funded deposit insurance scheme" to underwrite the collapse of a bank or building society in a financial crisis. It will also argue the levy was very small and would amount to only 50c a month on the accounts of average families if the banks refused to absorb the costs themselves.

When the guarantee was first put in place in 2008 by Prime Minister Kevin Rudd during the height of the GFC, it sparked a run on deposit accounts, prompting a freeze on withdrawals.

The banking sector, which is expected to pass the levy on to customers, slammed shifting the burden of protecting consumers against a future banking crisis from taxpayers to the banks.

Australian Banking Association chief executive Steven Munchenberg warned the proposal as "unnecessary" and would hurt depositors: "We already have a safe and well capitalised banking system. We don't support it and don't think it is valid. It is likely to be passed on to customers."

Shadow Treasurer Joe Hockey said: "We don't know the details but this is more policy on the run from Kevin Rudd. It means Australians end up paying for Labor's waste and mismanagement. It is another Kevin Rudd decision made without consultation."

Australian households have just over $600 billion on deposit, according to the latest data from the Australian Prudential Regulation Authority.

This is almost double the pre-GFC period, when household deposits hit a low of $307 billion.

Analysts warned any knocks to confidence in the banking sector would be bad for the economy, and bank stocks in particular.

"A levy represents a big chunk of cash disappearing from the real economy into the hands of the public sector. That can't be good for bank asset quality" banking analyst Brian Johnson said.

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