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Making flood reconstruction fair and sustainable

  • 28 January 2011

My 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