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New levy to pay for flood damage -

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The Federal Government is imposing a levy on taxpayers to pay for the flood recovery effort.


TRACY BOWDEN, PRESENTER: Political hostilities resumed today when the Gillard Government unveiled
its response to the most costly natural disaster in the nation's history: a one-off levy on
taxpayers that will raise almost $2 billion.

The Government will make up the rest of its $5.5 billion share of Queensland's reconstruction cost
by cutting spending elsewhere.

The Opposition says more spending cuts are needed, not a new tax.

While the levy has drawn cautious support from industry and business groups, at least one of the
Independent MPs who hold the balance of power in Parliament is yet to be convinced.

Matt Peacock reports.

MATT PEACOCK, REPORTER: The sheer impact of the floods in Queensland and elsewhere has been
immense. It's Australia's most expensive natural disaster, causing an estimated $5.5 billion worth
of damage to public infrastructure alone.

Well across the state, local government roads, culverts, bridges, many public buildings, sporting,
recreation facilities, community facilities, water and sewerage treatment plants, waste facilities
and airports too have been affected. Our estimate is that not less than 70,000 kilometres of local
government road has been damaged in some way.

BRENT FINDLAY, PRESIDENT, AGFORCE: I've travelled through most of the flood-affected areas and it
ranges from what I've seen in the Lockyer Valley, which'll stay with me for the rest of my life,
central Queensland, huge damage on extensive agriculture and also followed the Condamine down, seen
the impacts on dairies and also on crops where one end of the paddock is a magnificent crop, is
what the farmer could have expected for his whole paddock; the other end, there's no crop at all,
it's all been washed away.

MATT PEACOCK: And the Government's response? Almost $3 billion worth of spending cuts, plus a
one-off flood levy around $1 a week for earners above $50,000, rising to $5 for incomes above

JULIA GILLARD, PRIME MINISTER: Solely borrowing to rebuild Queensland is a soft option and I am not
prepared to do it. My Cabinet's job is to make the decisions which will bring the budget to surplus
in 2012-'13. In a growing economy, we pay as we go.

MATT PEACOCK: The Opposition wants no tax and deeper spending cuts.

TONY ABBOTT, OPPOSITION LEADER: We must pay what's needed to reconstruct Queensland and Victoria
after these terrible floods. Second, there is no need for this new tax coming on top of the mining
tax and the carbon tax that the Gillard Government has already promised for the coming year. Third,
the $1.8 billion that the flood tax will raise should be met through spending cuts. And fourth, and
most importantly, there is fat in the budget.

WARWICK MCKIBBIN, ECONOMIST & RESERVE BANK DIRECTOR: There are three ways to finance a disaster
like this. One is to raise taxes or a levy, one is to cut spending and the third is to borrow and
pay back over time. And clearly the third option is the way we should move forward on this.

MATT PEACOCK: Both the Government and Opposition have got this badly wrong, according to leading
economist and Reserve Bank board member Warwick McKibbin. He believes Australia's debt is so low
compared to similar countries, we can afford a deficit.

WARWICK MCKIBBIN: If you're spending - starting a new program which is permanent, then it makes
sense to build in the revenue required to fund that now. But this is a temporary one-off, one would
hope, and therefore the best way to deal with that is to borrow, as you would if your house was
damaged in a storm and you didn't have insurance. You don't stop eating until you've got enough
money to rebuild. You rebuild, you borrow and then you spread that over your lifetime.

MATT PEACOCK: The Government will slash a raft of its carbon abatement schemes, to be replaced
eventually by its promised price, or tax, on carbon.

JULIA GILLARD: I'm abolishing, deferring and capping access to a number of carbon abatement
programs. These include the Green Car Innovation Fun, the Cleaner Car Rebate Scheme, the Carbon
Capture and Storage Flagships and Solar Flagships programs, the Solar Hot Water Rebate, the Green
Start Program, Solar Homes and Communities Plan and the Global Carbon Capture and Storage

CHRISTINE MILNE, GREENS: We think it's cutting off your nose to spite your face to cut climate
change programs to fund disaster relief when we know that climate change is causing more disasters
yet to come.

MATT PEACOCK: The Government will need the support of the Greens and the independents for it to
have any hope of passing the tax into law, and both Tony Windsor and Bob Katter have called for a
permanent fund for these sort of disasters.

BOB KATTER, INDEPENDENT MEMBER FOR KENNEDY: Well I wanna know that there is a fund there that will
be there when the smallest town, the smallest town of tiny people is in desperate trouble. Can they
also be looked after?

MATT PEACOCK: And the Greens aren't the only ones upset by the cutbacks, with the automotive
industry warning that the dumping of the Green Car program will deter overseas investment.

ANDREW MCKELLAR, CHAMBER OF AUTOMOTIVE INDUSTRIES: Future investments may be put at risk if this
program is to be lost and I think that's very much to be regretted. And unfortunately, I don't
think that benefits the Australian economy as a whole.

MATT PEACOCK: But the Prime Minister's promise not to increase the levy if more money's needed is
proof for Opposition Leader Tony Abbott that more cuts can and should be made.

TONY ABBOTT: The Prime Minister knows that there is money there to be saved. The fact that they
were so readily able to come up with almost $4 billion worth of savings and deferrals shows that
they know there is fat in the budget, and that's what they should be drawing upon to fund this

MATT PEACOCK: The flood levy has nonetheless drawn cautious support from the major employer and
industry groups, and in Queensland itself, the peak body representing farmers has no doubts.

BRENT FINDLAY: We need to get money into the areas that have been affected and proper spending or
spending cuts are one thing, but we need a big cash injection in the short term to get this up and
running. If it's the levy that's gonna provide that, well that's something that hopefully is going
to work.

TRACY BOWDEN: Matt Peacock with that report.