Life on the land in Australia


Political fight rages

on PM’s flood charge

Kirsty Needham and Clancy Yeates
January 22, 2011

FARMERS and miners alone have already lost $3 billion in the floods, according to fresh government data – highlighting the challenge the government faces to raise new funds and cut back key programs.

The nation’s most expensive natural disaster will cost coal exporters $2.5 billion this financial quarter and growers of vegetables, cotton and grain $500 million, the data shows.

The Prime Minister, Julia Gillard, has steeled the nation for tough spending cuts, and potentially a levy, to fund flood rebuilding that analysts say could cost as much as $20 billion.

Julia Gillard ... considering a levy to fund rebuilding from the floods.
Julia Gillard … considering a levy to fund rebuilding from the floods. Photo: Rebecca Hallas

Both measures have brought into sharp focus the pressure Ms Gillard will be under when she brings down her first budget and are breathing new life into the opposition’s assault on what it call Labor’s wasteful spending.

A special report on the floods from the Australian Bureau of Agricultural and Resource Economics and Sciences yesterday highlighted the financial magnitude of the disaster, and said farmers’ full costs would be ”much more” as they were forced to replace machinery and other assets.

With the damages bill yet to be fully tallied, the Coalition went on the offensive, attacking the government’s plan to ”tax” the community to fund the recovery.

”Australians have suffered enough already and they don’t need to suffer yet another new tax from a government addicted to taxing and spending, very often wasteful spending,” said the Opposition Leader, Tony Abbott.

The Finance Minister, Penny Wong, hit back: ”The Howard government initiated some six levies in the time they were in government … if a levy was good enough to fund the buyback of guns, why wouldn’t someone think that a levy is good enough to help the people of Queensland as they rebuild from this natural disaster?”

The shadow treasurer, Joe Hockey, said the Coalition would vote against any flood levy legislation, leaving its passage dependent on the crossbench.

The independent MPs Tony Windsor and Bob Katter have indicated support for some form of levy to fund natural disasters.

But the Greens MP Adam Bandt wanted ”to look at the specifics of any proposed levy before deciding whether to support it”. Mr Bandt said Labor should reconsider the original mining tax before looking at new levies.

The South Australian senator Nick Xenophon said ”any flood levy would have to be reasonable, targeted and well spent, otherwise it could turn into a financial disaster”.

Should a levy proceed, it will contribute only a small portion of the federal government’s rebuilding costs, expected to be shared with the states affected by the disaster.

In 1996 the Howard government raised the Medicare levy from 1.5 per cent to 1.7 per cent for a year to pay for the $500 million gun buyback after the Port Arthur tragedy. This added $70, or $1.40 a week, to the tax bill for an average income.

After the collapse of Ansett in 2001, a $10 levy was added to domestic air tickets, raising $286 million in two years.

Senator Wong accused Mr Abbott of hypocrisy, as he had proposed a 1.5 per cent levy on companies to fund the Coalition’s paid maternity scheme at the last election.

The Nationals leader, Warren Truss, said a new tax would be a burden on flood-hit industries and businesses.

Some analysts also cautioned that an extra tax on households could disrupt the already-faltering economic recovery.

The chief economist at Westpac, Bill Evans, backed a delayed return to surplus rather than a levy, which could further weaken household spending alongside higher interest rates.

”The idea of a tax could be quite damaging for that key engine room in the economy,” Mr Evans said.

The Australian Chamber of Commerce and Industry said it opposed a levy, and flood rebuilding should instead be funded by rearranging spending priorities.

The Coalition has called for the sale of Medibank Private and the scrapping of the national broadband network to fund flood rebuilding. Mr Hockey listed the $429 million cash-for-clunkers scheme, the $800 million productivity places program and $750 million in environmental programs to be axed.

Senator Wong said government spending cuts in this year’s budget were a ”certainty” to pay for a ”massive infrastructure rebuild” and ”a very substantial economic cost”.

Ms Gillard said: ”As Prime Minister I’m working through what is a hard set of choices now and I will work through them in the interests of the nation and rebuilding the damage done.”

The federal government has paid out $225 million in emergency grants to 184,000 stranded householders in the past 1½ weeks alone.

Mr Abbott said yesterday flood-hit small businesses should be given a three-month holiday from GST tax burdens. The Assistant Treasurer, Bill Shorten, said the tax office had already granted a one-month reprieve.

Sourced & published by Henry Sapiecha

January 22nd, 2011
Topic: Uncategorized Tags: None

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