The tax will raise A$370 million (NZ$284m) over four years, and comes on top of the Turnbull government bank levy, announced during this year's Budget, forecast to raise A$6.2 billion over four years.
The reasoning of the South Australian Treasurer Tom Koutsantonis is somewhat muddled, to say the least.
He said the banks were "significantly undertaxed" and that the federal government isn't giving South Australia a big enough share of its revenues.
"The banking sector is very profitable and a Major Bank Levy is a fair and reasonable approach to ensuring the sector contributes its fair share," Mr Koutsantonis told reporters, ignoring the fact that banks like other businesses already pay tax on their profits.
Businesses have, quite rightly, always paid taxes on their profits. It is only fair for businesses which rely on public infrastructure, the rule of law and an educated workforce make a contribution to maintaining all of these. Sometimes specific industries are hit with a tax or a levy to fix a particular problem that that sector is suffering from or has created. This too is only fair.
But it is hard to see the South Australian bank levy - and for that matter also the Federal levy - as anything more than gouging.
Most Australians dislike the banks because of high fees, the way they quickly pass on interest rate hikes but hold back on rate cuts, and scandals around the bad financial advice many of them have provided to customers. They are easy targets for a bit of gouging with little risk of electoral backlash.
The federal and South Australian governments have spotted an easy source of revenue and grabbed it.
The business lobby is concerned about the precedent this creates, that any government seeking some extra money can simply snatch it from businesses, for no reason other than being unpopular.
Foreign businesses, too, will be considering the political risk of investing in Australia. 'Today the banks, but which sector will cop it tomorrow?' they might well ask.
"Australia is becoming a laughing stock of global investment circles as erratic governments - state, territory and federal - carelessly undermine and chop and change the rules of doing business," head of the Business Council of Australia Jennifer Westacott was quoted as saying.
Of course, big businesses says this sort of thing a lot. Whenever they are upset by something the government has done, they try to bash politicians over the head with dire warnings about how it will upset the neighbours.
But it is true that when deciding where to set up a new regional headquarters or an R&D hub or where to build a new mine, multinational businesses weigh up all sorts of factors: the strength of the local economy, the availability of skilled workers, the costs of land and other resources, and the rules governing businesses.
On its own, the new tax won't stop capital coming into the country. However, when it's a lineball decision between investing here and investing somewhere else, the bank tax is the sort of decision that could tip the balance in favour of another country.
If we add a few of those decisions together, the bank levies could prove to be a very expensive policy for Australia, which will eventually reduce employment and tax revenue.
WE'LL ALWAYS HAVE PIZZA
Domino's Pizza has been one of the standout performers on the Australian share market, with its shares rising from under A$10 in 2012 to over A$80 last year.
But its fantastic run might be coming to an end.
Its shares fell to a little above $52 last week as investors grow concerned over the competitive tension between Domino's and its store franchisees.
A report by investment bank Citi has revealed that over the past 12 years, income at head office had grown at 9.5 per cent annually, compared with a below-inflation income growth of just 1.2 per cent a year at the stores.
The pizza group will have to start sharing more of its profits with its franchisees and this will slow its income growth to just 4.4 per cent over the next nine years, Citi says. It has rated Domino's a "sell", with a target price of A$45.50.
Domino's share price had been buoyed for many years by investor expectations of strong ongoing profit growth, but now those expectations have disappeared, so has much of the support for its share price.
