Is a levy on bank deposits necessary?

The government has announced it will introduce an insurance levy of 0.05 per cent on bank deposits worth up to $250,000.

Hundreds of thousands of bank customers could benefit from the broadest class action in Australian legal history over credit card late fees worth hundreds of millions of dollars.

The levy, to start in 2016, is expected to raise nearly three-quarters of a billion dollars in revenue in its first 18 months, with the extra cash to go into a fund to protect people's savings.

The Australian Bankers Association head Steven Munchenberg said the fund wasn't necessary, as Australians' savings were already well protected by the country's robust and secure banking system. The extra costs borne by banks would most likely be passed onto customers, he added.

The government argued that if the levy were passed on in full to a customer with $10,000 in savings, it would cost less than 50c a month. A 0.05 per cent charge on that amount would generate $5 a year.

Is such levy necessary?