The Howard government's proposed smartcard is likely to cost a lot more than the predicted AU$1 billion, an IT security expert warns.

The federal government yesterday announced plans to introduce the computer-chipped card, which will replace 17 health and welfare cards from 2008 at a cost of AU$1 billion.

Professor Adrian McCullagh from Queensland University of Technology's Information Security Institute said today he doubted the government could deliver a card of such wide-ranging functionality for such a low price.

"That (AU$1 billion) may not be enough," Prof McCullagh told AAP.

He said the card would be "absolutely pervasive" based on the estimated number of people who obtained government benefits.

"The only people I can think of [who won't need a card] will be those that are under 18 and then some of them will need it as well," Prof McCullagh said.

"You might be looking at somewhere in the vicinity of eight million (people) will require a card. That's a lot of money."

Prof McCullagh based his opinion on a study published in April last year, estimating the introduction of seven million smartcards into the banking industry would cost about AU$700 million.

This card was a single-function card limited to online banking, compared to the multiple function card proposed by the government.

"We are now looking at a much more complex type of smartcard," Prof McCullagh said.

"Because it is to replace 17 old-style or analogue type cards. So that means the functionality of the card causes the cost of the card to increase substantially.

"So their estimate of AU$1 billion may actually be a gross underestimate. You could be doubling the cost."

But Prof McCullagh warned in order to protect vital personal information, the government should not take the cheapest option.

"If you pay peanuts then you get monkeys," he said.

All potential security questions needed to be resolved before any smartcard was introduced into Australia, he said.