THU 27 JANUARY 2011
The Prime Minister today announced the Gillard Labor Government’s response to the immense national challenge of rebuilding flood-affected regions across Australia.
Preliminary estimates, following consultation with the Queensland Government, indicate that the Government will need to invest $5.6 billion in rebuilding flood-affected regions, with the vast majority going on rebuilding essential infrastructure.
Two-thirds of that funding will be delivered through spending cuts.
The other third will be provided by a modest one-year progressive levy that won’t be paid by people directly affected by the floods or by low-income earners.
The Government will deliver the funding through the following measures:
· $2.8 billion in spending cuts, including removing industry assistance and cutting back other green programs by abolishing the Green Car Innovation Fund and the Cleaner Car Rebate Scheme and making other cuts.
· $1 billion in delaying some infrastructure projects– which will free up funds and skilled workers at a time of skilled labour shortages around the country.
· $1.8 billion through a progressive levy on people earning over $50,000. This will only apply to income above the $50,000 threshold. For example, someone earning $60,000 a year will pay less than a dollar a week, while someone on average annual adult full-time total earnings of $68,125 will pay $1.74 a week. Anyone directly affected by the floods will not have to pay the levy at all.
Every cent raised through these measures will go directly to flood-affected regions across Australia.
The Government recognises many Australians have already donated to people affected by the floods to help them with personal costs. That is a great contribution, but entirely separate from the job of rebuilding essential infrastructure in flood-affected regions – which is what today’s announcement, including the progressive levy, is focused on.
To ensure recovery and rebuilding can start as soon as possible, and to provide certainty to the Queensland Government and Queensland local authorities, the Australian Government has agreed to make an advance payment of $2 billion to Queensland.
The decisions the Government has taken have been necessary to meet the scale of this disaster while keeping the economy strong.
The Government will rebuild Queensland while delivering the budget surplus as promised in 2012-13.
It is important to note that estimates of the impact of the floods are preliminary, and do not take into account what is expected to be a hit to government revenues as tax receipts fall in the aftermath of the floods.
Where the funding is going
The vast majority of the $5.6 billion will be invested in rebuilding infrastructure damaged by the floods.
After discussions with the Queensland Government, preliminary estimates of the infrastructure repair costs under existing arrangements for the Natural Disaster Relief and Recovery Arrangements (NDRRA) are around $5 billion, of which the Australian Government will provide close to three quarters (around $3.9 billion).
There are also anticipated to be significant but smaller costs arising from flooding in other states.
The Government has also committed significant funding to provide for urgent assistance for those affected by flooding, in line with standard arrangements for natural disasters. This is estimated to include around $600 million for the Australian Government Disaster Recovery Payment and $120 million for the Disaster Income Recovery Subsidy.
The Government will introduce a modest one-year levy to help pay for the rebuilding effort.
The levy will not be paid by those affected by the floods, will not be paid by lower income earners, and will apply only in the 2011-12 financial year.
The levy is based on an individual’s ability to pay:
· Anyone earning under $50,000 will not pay the levy.
· People earning between $50,000 and $100,000 will pay 0.5 per cent of taxable income in excess of $50,000.
· People earning over $100,000 will pay 0.5 per cent of taxable income in excess of $50,000 and 1 per cent of taxable income in excess of $100,000.
· Someone earning $60,000 a year will pay 96 cents per week.
· Someone on average annual adult full-time total earnings of $68,125 will pay $1.74 a week.
· Someone earning $100,000 a year will pay $4.81 per week.
The levy will be paid through tax taken out of regular pay, in the same way the Medicare levy is paid.
To make sure those affected by the floods do not have to pay the levy, anyone who received an Australian Government Disaster Recovery Payment for a flood event in 2010-11 will be exempt from the levy.
The Government will make $2.8 billion in spending cuts, with the funding to go towards the recovery and reconstruction effort, including:
· Not proceeding with the Cleaner Car Rebate Scheme
· Abolishing the Green Car Innovation Fund
· Reducing and deferring spending on the Carbon Capture and Storage Flagships and Solar Flagships programs and the Global Carbon Capture and Storage Institute
· Abolishing the Capital Development Pool from 1 January 2012
· Discontinuing funding for the Australian Learning and Teaching Council
· Reducing the National Rent Affordability Scheme dwelling target
· Redirecting funds from the Priority Regional Infrastructure Program and Building Better Regional Cities Program
· Capping annual claims under the Liquefied Petroleum Gas (LPG) Vehicle Scheme
· Capping funding for the Renewable Energy Bonus Scheme – Solar Hot Water Rebate
· Not proceeding with Round 2 of the Green Start Program
· Capping funding for the Solar Homes and Communities Plan
· Withdraw funding to the O-Bahn City Access project.
The strong Australian economy means that Australia faces very real skills shortages. This pressure on skilled labour will increase in the face of the major rebuilding effort in Queensland.
To make room for this demand the Government will defer $1 billion worth of infrastructure projects, freeing up builders, carpenters, electricians and other skilled workers to rebuild essential infrastructure in flood-affected regions.
Around $325 million of deferred projects have already been agreed with the Queensland Government, with the remainder to be discussed with the relevant state and territory governments (see Attachment 4).
Skills and the rebuilding task
As Australia rebuilds, this will create additional demand for skills and workers.
To assist employers in flood-affected areas fill positions and get on with the job of rebuilding, the Government will:
· Establish a special team within the Department of Immigration to deliver employer-sponsored temporary visas (457 visas) within five days (where applications are ‘decision ready’) for employers genuinely involved in Queensland flood reconstruction work; and
· Double the number of places in the job seeker relocation pilot program to help job-seekers move to take up employment opportunities.
The 457 visa program is demand-driven. These measures simply make it faster for employers to get the workers they need to rebuild. All workers seeking a 457 visa will still be subject to strict skills tests.
The recent floods across Australia pose a unique challenge.
This is likely to be the biggest natural disaster in Australia’s history in economic terms – an extraordinary event requiring an extraordinary response.
In times of crisis Australians see what needs to be done and we do it.
Australians have pulled together in the face of crisis in the last few weeks, and will continue to pull together in the difficult months of rebuilding that lie ahead.