Australia's government has blown the cobwebs off a year-old proposal to introduce a deposit insurance scheme covering most bank deposits.An equivalent scheme will also apply to policy holders of general insurance companies.The decisions, announced yesterday by the Treasurer, Wayne Swan, represent a delayed response to the policy issues raised by failure of HIH Insurance seven years ago as well as the badgering by global financial regulators, including the International Monetary Fund, for Australia to establish such a scheme.The Labor government has essentially adopted the proposals devised by the Council of Financial Regulators in 2006 but largely ignored by the Coalition government. Those proposals in turn derive from a report by Kevin Davis, then professor of economics at the University of Melbourne and published more than four years ago.Last year's run on, and the subsequent nationalisation of, Northern Rock in Britain may have refreshed interest in deposit insurance.Swan said yesterday the government would enact a Financial Claims Scheme. The starting date for the scheme is not clear.Claims under the scheme would be capped at $20,000.The scheme would not apply to life insurance policies or to superannuation funds.Swan said the Commonwealth government, through the Australian Prudential Regulation Authority, would fund claims under the scheme. He said APRA would recover costs as a creditor of the failed institution. He said that only "in the unlikely event that the liquidation does not provide full recovery of the government's costs" would a levy then be applied to relevant financial institutions.In other words there's no levy planned as part of the scheme, not even of a "pay later" variety.