Arts industry leaders say people in the sector are "horrified and depressed" after the Government announced cuts of $52.5 million from the sector in its mid-year economic update.

Key points: Screen Australia's budget cut for third time in 18 months

Screen Australia's budget cut for third time in 18 months Savings to be diverted into grants for Hollywood studios, local productions may suffer

Savings to be diverted into grants for Hollywood studios, local productions may suffer Advisory literary council scrapped after three months, saving Government $6 million

Screen Australia's budget has been cut for the third time in 18 months, and an advisory literary council has been scrapped three months after it was established.

The Government said it was diverting most of the savings into grants for big-budget Hollywood studios bringing productions to Australia.

Screen Australia has lost $10.3 million over four years, which is a 3 per cent cut to its budget.

"I think people are horrified and depressed," said David Tiley, the editor of the online film industry magazine ScreenHub.

"It means that we're getting two loads of cuts a year."

The Federal Government is diverting $35 million — proceeds Screen Australia made from the sale of TV studios in Sydney — to Hollywood studios.

One of those productions is the third instalment of Marvel's Thor — the previous two films in the series raked in hundreds of millions of dollars at the box office worldwide.

Mr Tiley said it was good news that more international productions were coming to Australian shores, but he thinks smaller local productions will suffer.

"Funding those projects is terrific. It's something that sector has fought for, for a long time," he said.

"It also helps us to attract other international projects and it helps us to be good enough for our films to compete around the world, so it's all extremely valuable.

"The problem is ... where the money has come from, and the bulk of it this time round has come from the sale of the piece of land which Screen Australia owned which has essentially been hijacked and transferred sideways."

Book Council scrapped after three months

The Government will also save $6 million by scrapping the Book Council of Australia.

The advisory council was set up just three months ago.

It was intended to advise the Government on strengthening Australian literature.

The council's demise is no surprise to Stuart Glover, the founding director of the Brisbane Writer's Festival and a lecturer at the University of Queensland.

"I think there was some ambivalence about the council anyway," he said.

"I think the more industry-orientated parts of the sector — the publishers, the booksellers, the people who are running and concerned with the $2 billion that flows around the sector — were very much in favour of the council because it addressed problems that they had about market, about digital books, about copyright structures and those kinds of things.

"But those parts of the sector that were really more concerned with the cultural aspects were more ambivalent about the council and saw it as a poor substitute for the literature board of the Australia Council, which was dismantled in 2014."

But Dr Glover said that what happens from here is unclear.

"The Arts Minister is saying that he's been listening to industry voices and will make some kind of response," he said.

"But whether that's something that responds to economic questions or whether it responds more to cultural questions is unclear at this stage."