The big four banks plus Macquarie face a levy that will raise $6.2 billion over four years.
The budget was the first since the government was re-elected on a tiny majority past year.
In the 2017 Budget announcement, Treasurer Scott Morrison announced a 0.06% annual levy on key funding sources for Australia's major banks - a cost that could be passed on to Aussie borrowers and may drive them toward alternate lending sources.
Spending will be A$34.6 billion (S$35.8 billion) in 2017-18, with plans to lift spending to 2 per cent of gross domestic product by 2020-21.
Budget papers indicate the deficit, which is A$37.6b for 2016/17, will dramatically fall from A$21.4b in 2018/19 to just A$2.5b in the following year.
Australian Treasurer Scott Morrison delivered his federal budget Tuesday evening in Canberra, seeking to boost the government's flagging poll ratings through a A$75 billion ($55 billion) infrastructure plan that aims to support growth and jobs.
"There is no rhyme or reason to the bank tax, it is not a deposit guarantee scheme".
Crossbench senator Jacqui Lambie predicted the banks would fight the levy all the way as she renewed her call for a royal commission into bank misconduct. Diron added that the removal of the zombie measures "enhances the transparency and predictability of budget outcomes, a credit positive". There will be a drug testing trial for 5,000 new welfare recipients.
"If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their significant bonuses", the Treasurer said.
Standard & Poor's did not immediately comment on the budget.
"There will also be $31.4 million for capital works to maintain important infrastructure, gaining efficiencies in reduced long-term maintenance costs", Mr Morrison said.
"This new tax is not a well thought-out policy response to a public interest issue, it is a political tax grab to cover a budget black hole".
The Australian government is hoping to deter many worldwide investors from investing in the country's housing market in an effort to stop prices spiralling out of control and help support first-time buyers in their efforts to get a foot on the housing ladder.
In 2010, under former Prime Minister Kevin Rudd, the Labor government introduced a new mining tax on big mining profits and faced an industry backlash which included anti-government television commercials.
"If the government is looking for some extra money, they don't need to give a tax cut to millionaires on July 1 and they don't need to go ahead with corporate tax cuts".
And, while collectively, Australians reckon banks are greedy, Australians also know that increasing a tax on a business means that cost will have to be met from somewhere.
The unemployment rate won't change much from 5.75% this year to 5% in four years time - that is hardly a big movement. Inflation will rise from 2.2% to 2.5% and stay there, meaning real wage growth will be slow to emerge.
$216.6 million over four years cut from funding for aged care - a cut of around $1670 per resident per year.