Making flood reconstruction fair and sustainable

18 Comments

pm.gov.auMy warm glow of humanitarian solidarity in the face of nature’s flood fury has faded a bit in the light of bickering across the country about how to fund post-flood reconstruction.

Well, more who should fund the reconstruction. Government, from existing funds? Those directly affected, from insurance payments and their own pockets? Or all of us together via what is being referred to, depending on your political persuasion, as a floods reconstruction levy or a great big new tax?

Yesterday the Prime Minister announced the Government's flood relief plan. Preliminary estimates indicate the Government will need to invest $5.6 billion to rebuild flood affected regions.

The Government will source this funding through a mix of spending cuts ($2.8 billion), delayed infrastructure costs ($1 billion) and a progressive levy on people earning over $50,000 ($1.8 billion). 

The majority of pre-announcement speculation focused on the levy. Given the nature of the need and its cause, it was widely accepted that reconstruction on the scale required is a national responsibility. But much concern was aired about who would be hit by a levy and who would be exempt. 

The levy announced yesterday is progressive, based on capacity to contribute, and will be paid through normal income tax arrangements (as with the Medicare levy). Anyone affected by the floods or earning under $50,000 is exempt. This is precisely the type of approach that both social justice principles and practicality dictate.

The flood levy’s most serious weakness is that it is a one off response. Given that climate science predicts an increase in the frequency and severity of extreme weather events, our just announced twelve month floods response framework will be insufficient to prepare Australia to respond to similar events over the medium to long run. It is time for Australia to develop a permanent capacity to respond to natural disasters. New Zealand bit the bullet last year and developed a national natural disaster fund after the terrible earthquakes in Christchurch.

While our flood response plan includes spending cuts and delayed infrastructure investment, these are really only able to be short term, one-off responses. Government must be able to budget confidently in order to provide the Australian community with the services and infrastructure that it requires. Any longer term thinking about a national natural disaster response capacity is going to have to focus on a levy/tax.

The other key elements of any long term thinking are the consideration of compulsory natural disaster insurance and the location of infrastructure reconstruction. Robust discussion about natural disaster insurance should be on the national agenda. Whether infrastructure is rebuilt in the same places must be under consideration if we are to have a serious response to what the science tells us will be much more frequent extreme weather events.

It may be hard to think about more natural disasters on anything like the scale of the recent floods, and it may be politically unpalatable to name what our climate future most likely holds. But this is precisely the time that we must rise to the serious challenges we face as a country.

Our view at UnitingCare Australia is that the government ought to raise enough revenue to meet the communities’ need. We advocate an ongoing revenue mechanism to deal with increasing levels of natural disasters. We must ensure that expenditure spend adequately targets the poor and vulnerable. I would say that we need to review Australia’s taxation system, but we already have. 

It is past time to dig out the Henry Review and take a good hard look at the bottom end of our tax-transfer system to address complex inequality. We must reduce effective marginal tax rates. If we do introduce a national natural disaster fund then we will need to carefully consider both the structure of any levy and how it is spent to ensure that it protects the interests of the poor. A one off levy applying to individuals earning more than $50,000 a year is a good short term approach. Over the long term however, it would be better to increase the low income tax offset – and better still to pull out the Henry review and address complex inequalities properly.

The floods levy is both a good beginning and yet another example of why we need to fix Australia’s taxation system.


Lin Hatfield-DoddsLin Hatfield Dodds is National Director of UnitingCare Australia. She is immediate past President of the Australian Council of Social Service.

Topic tags: Lin Hatfield Dodds, UnitingCare, floods, levy, Julia Gillard

 

 

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Existing comments

Thanks for these comments. If we're placing so much emphasis on the potential for climate change to wreak havoc - as we should - surely it's time to think more radically still and start talking up a steady state economy. A finite planet cannot go on for ever accomodating economic growth.
Len Puglisi | 28 January 2011


Some key questions which should be more than rhetorical. How is appeal money applied and is it applied differently to government relief. If it is not then the donations are merely donations to government right? How do we make sure that insured people are actually better off than uninsured and this retaining the motivation of people to insure or to have a real understanding as to why the house they are choosing to live in is not insurable. If government or appeal money eliminates the gap between the insured and uninsured who will in the future take care of their own risk? Plain community and heck, Christian charity says we need to help all these people.

An eye on the future means we need to differentiate. If we are having compulsory levies as well as a flood appeal people are entitled to know the difference, that supporting an appeal actually makes a difference. If it is all the same bucket then the charity is making NO difference.
Andrew Coorey | 28 January 2011


Shouldn't the Coal miners be paying the levy?
David | 28 January 2011


Yes, Len has a good point. Rather than simply responding to the results of climate change, we should actually have strategies in place to arrest climate change as much as possible and this means confronting our emissions and our love affair with growth. We need to look to a different type of economics and we also need to stabilise our population, seeking to have migration based on compassion (for asymlum seekers say) rather than the ridiculous idea that we need more people in Australia. We need that like a hole in the head. I love the multiculturalism we have enjoyed but we really have enough people now. The baby bonus and other such "pro-population growth" strategies should also be scrapped.
WicketWatcher | 28 January 2011


I'm all for collective responsibility in times of need, but David's question is worthwhile. If the floods are indeed related to climate change (ie. La Nina plus high sea temperatures induced by climate change) then surely the polluter pays principle is worth a look...
C. | 28 January 2011


There has been a major disaster in Queensland this year with many thousands of people adversely affected, a private response, as generous as it has been, will not meet all of the costs of rebuilding much of the public infrastructure we may all at one time or another use. The Government wants to introduce a very modest levy to restore services as required.
I personally do not receive the minimum income that attracts the levy, I am unable to contribute to the reconstruction that will take place, I am disappointed not to be able to do so.
Kevin Vaughan | 28 January 2011


Fair comment on this one. Being half Queenslander and the other half NSWperson, living in Victoria, I am saddened by what seems to be nitpicking and stodgy resistance on the part of some to contribute to public financing of a National recovery effort. We are all damaged by these disasters.

It seems to me that we might learn something from our NZ neighbours and set up a budgeted National Disaster Fund. Theirs is largely covering the restructuring of those areas hit by the Sth Island earthquakes last year. Something to ponder.
David Timbs | 28 January 2011


I'm all for collective responsibility in times of need, but David's question is worthwhile. If the floods are indeed related to climate change (ie. La Nina plus high sea temperatures induced by climate change) then surely the polluter pays principle is worth a look...
C. | 28 January 2011


Thank you so much for this insightful essay, Lin Hatfield. Indeed, Australia's tax system needs to be fixed. The GST is a REGRESSIVE TAX.

Someone with seven pairs of shoes will be left with six pairs if one pair is given to someone in need of shoes. But someone with two pairs of shoes is left with nothing after a donation of two pairs.

And while it is fair that those on, say, $60.000 p.a.pay 0.5% of their income on flood tax, and those one $100.000 pay 1%, an increase in taxation for those over $150.000 or $200.000 is not in place.

There are political commentators working for the ABC who earn $250.000 p.a. - is Mr. Swan afraid of them? To reduce the 'National Rent Affordability Scheme dwelling target', especially at a time like this, is a cynical act of elitism which needs a move towards magnanimity.
Joyce | 28 January 2011


We need that levy as a permanent thing to cover disasters in the future so long as governments keep their hands off it except for real disasters.
DON | 28 January 2011


Kevin, go to your bank and donate something to the Anna Bligh's flood Appeal. This money goes directly to victims to replace household items or towards internal lining of their homes.

My son's business which he bought about five years ago was completely wiped out. He will be lucky the get anything from the Flood Appeal because of his high income last year. A cheap government loan of $250.000 will go nowhere. He and many others living or working on flood plains were refused flood insurance years ago. Insurers will not insure against a certainty. There needs to be a form of national insurance to cover this.
Elizabeth, Redlands | 28 January 2011


I'm all for a National Disaster Fund and ensuring simpler language in insurance policies. I had direct experience of the long term ramifications, both personal and business, from the Sydney hailstorm. Our business was insured and the policy had been reviewed earlier in the year, but when the crunch came found we were not properly insured for loss of business income. To cut a long story short to avoid bankruptcy everything had to be sold including our home and all the staff ended up out of work. The effects continue years later, I describe it as having lost our 'mojo'.

We now find it hard to picture a future where we will recover enough financially to own a home of our own, but chose to move overseas last year to regain lost ground via higher salaries. Disasters like the floods will only become more frequent and require more than a one-off approach.
Michelle Moore | 28 January 2011


I disagree that "A one off levy applying to individuals earning more than $50,000 a year is a good short term approach." It just shows the weakness of this government's handling of the economy. Did you know that the promised $1,000 hand out to all victims has't happened!!

It will take months..its needed now.

Rob Colquhoun | 28 January 2011


Yes, of course the Queensland flood is a result of all those nasty CO2 emmisions. Unfortunatly, to get those responsable to pay for the damage, I suspect we would have to wage war on the United States, China, the European Union, as well as at least 17 other countries to recoup the funds from emitters most responsible. I really doubt the odd 1.3% owed by our coalminers would suffice.

For those who point out the lunacy of blaming coal miners, let alone climate change, for the flooding of a city built on a floodplain, especially when the flood was considerably smaller than the 1893 flood, I have irrefutable evidence to counter you. Even the nasty coal miners themselves, you know the ones that provide the energy for every pulse sent from my keyboard to my computer to signify a keystroke and the energy for every bit sent to my computer to form this webpage and every single bit of everny that helps me run my selfish materialistic lifestyle, feel guilty about this. My proof? BHB Billiton alone has donated 11 million dollars for flood relief and there has been another ~3 million dollars from other major coal mining companies. Obviously they have donated so much money because they are feeling so guilty.

Regarding the article I feel much comfatble with generous Christian charity at a personal level rather than State-sponsored charity. Still, I guess that if I were affected by the floods I would probably change my mind.

On a brighter and less sarcastic note, it is heartwarming to see the number of Australians that have pitched in so far to help with the floods whether it be financial or physical assistance.
Francis | 28 January 2011


Like David and C, I'm all for the polluter pays principle, as are all libertarians, anarcho-capitalists, Chicago School/Friedmanites, and thoroughgoing free marketeers in general.

But since there's not a skerrick of evidence that the recent QLD floods are due to anthropogenic global warming, any more than the 1974 floods, or the 1893 floods ...


(see, eg, Bureau of Meteorology Special Climate Statement 24 of 25/01/2011:

"the available station data indicate that peak rainfalls in the region during the 1893 event were much heavier than those during either the 1974 or 2011 events.”),

methinks they're barking up the wrong tree in going for the coalies.

If it's pure justice, and not some crude anti-capitalist Luddite thuggishness they're on about, I'm sure they along with Lin Dodds will welcome this official opinion as valuable information.

What are the odds?


HH | 28 January 2011


Just to add my voice to those showing how ridiculous it is to blame the coal industry for this flood. Before this disaster none of the doomsday sayers said anything about flood. It was all about drought. That's why the desalination plants were built. But now that the opposite has happened, they were expecting that too. Global warming, to climate change, to drought, to more extreme weather events. You'd think that we had never had a flood or drought before. These people suffer from the Goldilocks delusion. They think that they can influence the weather to be neither too hot nor too cold, but just right.
John Ryan | 30 January 2011


Thank you - Tony Windsor summed up Abbott the best.

Disgraceful.
Marilyn Shepherd | 30 January 2011


UnitingCare Australia is indeed fortunate to have reinstated Lin as National Director. Her value at the helm of this organsation with her insightfulness, wisdom, common sense and human compassion in the above article is evidence of what she has to offer.
Sue Doherty | 03 February 2011


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