From levee banks to levy banks, recovery from the recent Queensland — and NSW and Victorian — floods will cost the Australian economy billions. “…The best preliminary estimate of the direct cost to the Federal Budget of this summer’s flood disaster is just over $5.6 billion,” declared PM Julia Gillard yesterday, as she proposed a flood levy to help raise around one third of those costs.

The facts of the levy — essentially a once-off tax — are this:

  • Only Australians who earn over $50,000 will pay the levy, with people earning between $50,000 and $100,000 to pay 0.5% of taxable income in excess of $50,000
  • People earning over $100,000 will pay 0.5% cent of taxable income in excess of $50,000 and then 1% of taxable income in excess of $100,000
  • The Queensland floods are expected to cost around $3.9 billion in recovery — mainly in rebuilding infrastructure — while floods in Victoria and NSW will cost $1 billion and the remainder will go on short-term financial assistance for immediate flood victims and income assistance for farmers, workers and small businesses
  • Those affected by floods — as established by whether citizens received an Australian Government Disaster Recovery Payment — are exempt from the levy
  • An estimated 4.8 million taxpayers will be hit with the levy.

It’s important that Gillard gain popular support on this in order to get the levy passed in a tight parliament. So far, things are looking worrying for her.

The majority of talkback callers yesterday afternoon and this morning questioned why they were being hit by the flood levy tax, particularly after they’d already donated. One caller, whose family earned a combined $200,000+, objected to the levy on ABC 774 Victoria, noting that he had already donated over $1000 to the appeal.

Caller Phil to Triple M Melbourne said Australians have become whingers who are happy to take money from the Federal Government, but do not want to give anything back.

Many callers mentioned the high cost of the National Broadband Network, with several callers happy to pay a flood levy provided the NBN is scrapped.

Caller Bill, a final-year economics student, spoke to ABC 612 in Brisbane — he said the levy is well and good from an egalitarian standpoint, but it’s indicative of a bigger problem that’s creeping into Australia. He says if the Government is constantly bailing people out and introducing levies, it doesn’t encourage people to take responsibility for their own circumstances.

Other callers were quick to question why a similar levy wasn’t introduced after the Black Saturday bushfires in Victoria and the Canberra bushfires, or noted how they had lived through natural disasters and had received no such treatment from the government. Others noted how much the Liberal government under John Howard loved levies, with an Ansett levy — that went on for longer than promised — and a gun buyback levy introduced under his government.

ABC News Breakfast journalist Michael Rowland noted a similar phenomena: “A torrent of viewer comment on News Breakfast on the flood levy. Overwhelmingly negative.”

A glance at the newspaper front pages also show a variety of attitudes across the nations from “Gillard’s levy hits rough water” in Melbourne’s The Age to “Hands up to help your mates”:

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It’s interesting to note that the girl on the front cover of The Australian complaining about the levy won’t actually be paying the levy,”Ms Gregg believes her pay as an administration worker will be under the threshold of the levy,” although her partner is expected to pay it.

Here’s a look at what the pundits are saying:

Don’t say the ‘T-word’ warns Tony Wright at The Age:

Tricky business, announcing a new tax. Rule No. 1 is to avoid at all costs actually mentioning the word. And it must be presented as not only necessary, but virtuous.

Compared to other government programs and initiatives — like Rudd’s stimulus — the $5.9 billion number is positively trivial, argues Peter Hartcher in the Sydney Morning Herald.

For all the political sound and fury that you will see in the weeks ahead, the economic cost to the nation appears to be eminently affordable.

The Gillard government is suffering a “crisis of confidence”, declares Jessica Irvine in The SMH:

Joe Hockey is right. This flood levy is a dumb idea. And I suspect even Julia Gillard knows it.

This is typical of a government still attempting to establish authority, says Tom Dusevic in The Australian:

Again, Labor has been forced to make policy on the run, the default setting of a tentative leader and a government that appears forever under the pump.

No one cares about the policies being cut to pay for the floods apart from the greens, writes Ben Packham in The Oz:

The government was just waiting for an excuse to dump its policy duds. The hardest thing about the cuts for Labor is the pressure they will put on its fragile parliamentary majority.

It wasn’t an accident that Gillard used the word ‘I’ 50 times in her National Press Club speech yesterday, notes Michelle Grattan in The Age:

When a prime minister resorts so often to the personal pronoun, there is a reason. Gillard wants to stress her authority.

The Prime Minister has not had a good summer. She has come under a lot of criticism for looking stilted when visiting flood areas or talking generally about the crisis. In contrast, Queensland’s Anna Bligh, on the nose a few months ago, has won extensive praise.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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