Australia Government Weighs Levy For Flood Damage: Report
Author: Rob Taylor
Australia's government is reportedly considering a taxpayer levy to help pay for massive flood rebuilding, while preserving the budget's path back to surplus in 2012-13, as one major bank warned on Tuesday the damage bill could reach A$20 billion.
A levy could take the form of an addition to the 1.5 percent Medicare levy backing public health and hospitals, and which raises A$10 billion ($9.9 billion) a year, the Australian newspaper said, without naming sources.
Flooding blamed on rains triggered by a La Nina weather pattern in the Pacific has devastated huge areas of Australia's eastern seaboard, flooded parts of Brisbane, the nation's third-largest city, shut vital coal mines and rail lines, and destroyed crops.
Rebuilding estimates from banks and economists have mostly ranged from around A$3 billion to A$10 billion, but illustrating the uncertainty ANZ bank warned it could come in at close to double that when floodwaters subsided and the full scale of the devastation became clear.
"The Queensland Premier's statement that 28,000 homes will need to be rebuilt will alone come at a cost of around A$8bn on our estimates, suggesting the total rebuild effort could be in the order of A$20bn," the bank said in a research note.
A spokesman for Treasurer Wayne Swan said it was too early to speculate how the government would assist flood stricken communities, but Prime Minister Julia Gillard said the government's obligations to help Queensland would be part of the planning for the 2011-12 budget, to be unveiled on May 10.
"I know that there's going to be a lot of effort and money and resources needed to rebuild, particularly rebuild Queensland, but we'll be managing the federal budget ... so that we can meet those needs, as well as managing the budget into surplus in 2012-13," Gillard told reporters.
Australia's CommSec, the investment arm of Commonwealth Bank, said economists were tending to overestimate the economic and financial impact, with activity to be boosted in the longer-term and the cost in the realm of A$3-5 billion.
Australia's minority government, whose coffers are bulging from the resources boom, is unlikely to face onerous pressure for spending cuts to pay for flood damage, with a recovery levy a distant prospect, government sources told Reuters.
The A$1.3 trillion economy remains on track to grow by a robust 3 percent this year, and the stock market is at its highest since the country's summer floods began in November.
The floods, which have so far killed 24 people with 12 still missing, have been blamed on the strongest ever recorded La Nina, which brought Australia its third wettest year on record in 2010, covering an area the size of South Africa.
La Nina has also caused major flooding across a third of Sri Lanka, destroying 21 percent of the nation's staple rice crop and raising fears of food inflation, while one million people were affected by heavy rains in the Philippines.
Victoria state was bracing on Tuesday for more flooding expected to cut the town of Horsham in two during what has been described as a one-in-200-year flood, while an eight-year-old boy was swept away at Shepparton in the state's north-east.
Thousands of people in the state, in 51 towns, face an anxious wait over the next 24 hours as a series of flood peaks roll across the state.
Gillard formed a task force of business leaders to help Queensland as it recovers, to be chaired by Swan, as a navy minesweeper began clearing tonnes of sunken debris from Brisbane's main port and shipping channels.
"We don't even know what the price tag is yet because we can't even know what the full flood damage is. So we will work through this a step at a time," she said.
The government's recovery task could be helped by global coal prices, which have soared more than 20 percent, in part because Queensland's floods have disrupted up to 90 percent of Australia coking coal exports, used in steelmaking.
Some analysts say hard coking coal prices could hit $400 to $500 a tonne, from the current $275 spot price, which would inject more money in the government coffers in the world's biggest coking coal exporter.
Rio Tinto, BHP Billiton and Xstrata are among the companies involved in coal mining in Queensland.
(Editing by Balazs Koranyi and Ed Davies)