Swan Says Australia's Levy for Rebuilding After Floods `Very, Very Modest'

Australian Treasurer Wayne Swan defended the government’s proposed A$1.8 billion ($1.79 billion) levy to help rebuild flood-ravaged Queensland, saying the tax is “very, very modest.”

Six out of 10 Australians “will pay less than $1 per week,” Swan told reporters at a flood recovery center in Queensland today. “So this is a very modest levy to rebuild community infrastructure in these devastated regions.”

Queensland is recovering from Australia’s worst flooding that has killed as many as 32 people and affected 30,000 homes in the northeastern state.

Prime Minister Julia Gillard on Jan. 27 announced the A$1.8 billion levy on middle and high income earners, as well as A$2.8 billion in budget cuts and A$1 billion in delayed infrastructure projects for flood rebuilding.

Opposition leader Tony Abbott today branded the levy a “lazy policy” that, if passed in Parliament, will highlight the “spending addiction” of Gillard’s Labor Party as her government seeks to return Australia to a budget surplus in 2012-13.

“It’s hard to imagine that $1.8 billion worth of savings can’t be found from a budget in excess of $350 billion a year,” Abbott said in a speech at the Young Liberal Convention on the Gold Coast in Queensland.

Australia’s government should end its “fetish” for avoiding budget deficits and borrow to pay for flood damage rather than impose a one-time levy on taxpayers, Warwick McKibbin, a member of the central bank’s board, said yesterday.

Better Strategy

“Borrowing is a far better strategy,” McKibbin, a professor at Australian National University, said in an interview on Bloomberg Television in Canberra. “This is a classic example of where a government should borrow. We have room to run deficits in the short term when needed for these sorts of disasters.”

Queensland’s flood disaster will force up prices, slow economic growth and cut government revenue as food and mining production fall, Swan said in a speech in Brisbane yesterday.

“Several billion dollars” will be lost from coal production, A$1 billion from agriculture and A$300 million from tourism, Swan said. Queensland Premier Anna Bligh said the floods will slow the state’s economy, cut the budget surplus and delay building projects.

Queensland produces 32 percent of Australia’s vegetables and 33 percent of fruit, including 55 percent of tomatoes.

“So the floods have wiped out a significant part of our country’s food bowl, and this is going to feed into prices,” Swan said yesterday, forecasting that the floods will add 0.25 percentage points to inflation this quarter.

Cyclone Alert

Queensland is bracing for more disruption with a cyclone forecast to hit its northeastern coast late tomorrow and Jan. 31. The Bureau of Meteorology warned coastal communities along a 650-kilometer (400-mile) stretch of coast south of Cairns to prepare for damaging winds as Cyclone Anthony is forecast to regain strength to a Category 2 storm.

Anthony was centered in the Coral Sea about 900 kilometers east-northeast of Cairns as of 10 a.m. Queensland time today, according to data from the bureau.

Queensland police and state emergency services are also monitoring a low pressure system northwest of Fiji, and have asked local communities to make preparations as a precaution, Deputy Police Commissioner Ian Stewart told reporters. The system is forecast to develop into a cyclone and move west on Feb. 1, the weather bureau said.

“Some people may be concerned that we’re asking for this preparation to occur at this early stage,” said Stewart. “The potential for these two events is of such a nature it would be way too late to ask people to undertake the normal preparations sometime next week. We need them to act now, and the clear messages are to stock up on essential goods.”

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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