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Gillard's tax plan

Nick Bryant | 07:16 UK time, Thursday, 27 January 2011

Presenting it as a communal act of national mateship, Julia Gillard has opted for a flood tax to help pay for the reconstruction after the floods. Most Australians will end up forking out between A$1 and A$5 a week, although low income earners and the victims of the floods themselves will be exempt. About two-thirds of the A$5.6bn reconstruction money will come from cuts in infrastructure spending and some flagship environmental programmes.

Usually, budgets frame the political year. Now, the floods reconstruction programme - a kind of emergency budget, if you like - will define Australian politics for the months to come. As we noted in Floods: The Fall-Out , its ideas and implementation has the potential to make or break Julia Gillard's prime ministership.

Ms Gillard is essentially arguing that every Australian should lend a helping hand, that the sums involved are affordable and modest - it's already been dubbed a "light-touch levy" - and that most of the money will come from savings from the federal budget.

In reply, the conservative opposition has complained that the government is imposing yet another tax, that many people who have already made charitable contributions are being handed the collecting plate for a second time and that it could depress consumer confidence at a time when retail spending is already flat. They argue that deeper savings could have been made from the federal budget, and that the levy is not necessary.

Politically, there are risks for both sides. The Labor government has what are euphemistically called "delivery problems": a reputation for botching the implementation of major spending schemes, such as the school rebuilding and home insulation programmes.

The Liberal-led opposition runs the risk of sounding heartless in the face of Queensland's suffering.

As the head of a minority government, one obvious question is whether Julia Gillard is capable of getting her proposals through parliament. Having deferred or killed off some of the government's environmental programmes, such as the cash for clunkers scheme, the Green Car Innovation Fund, the Global Carbon Capture and Storage Institute, the Green Start program, and the Solar Hot Water Rebate scheme, it will presumably be harder to secure the all-important vote of the Greens MP, Adam Bandt. The government says the best way to tackle climate change is to attach a price to carbon, but these were intended as remedial measures before an emissions trading scheme comes into effect, whenever that may be.

The independent MPs, Tony Windsor and Rob Oakeshott, have already been non-committal.

A couple of quick, further observations. Many of these environmental projects being delayed or axed were Kevin Rudd's pet projects. Indeed, the former prime minister stood alongside Barack Obama at an international summit in Italy to announce the Global Carbon Capture and Storage Institute. This may come to be viewed as the true end of the Rudd era, according to ABC's political commentator, Annabel Crabb.

Some readers might be interested to learn that the government has promised fast-track approval for temporary skilled migrants who wanted to go to work in flood areas.

So should Australians lend a helping hand by putting it further into their pocket?

UPDATE: Deploying the "M-word" once again - her frequent mentions of "mateship" are presumably designed to give the proposals a measure of political immunity - Julia Gillard set out today to sell her flood reconstruction programme. In a radio interview this morning, she was given one of the tougher cross-examinations I have heard an Australian prime minister subjected to.

It came from Neil Mitchell, a Melbourne radio talkback host famed for his hard-hitting style of interviewing. At times ill-tempered, you can listen to an excerpt from the 20 minute interview here, and it's bruising stuff.

And here's something to set the cat among the pigeons. The state premier of New South Wales, Kristina Keneally, who faces a tough re-election campaign in March, is calling for the tax to be adjusted for Sydneysiders to reflect their higher costs of living.

"The Commonwealth, before they lock this levy in stone, may do well to consider some fine tuning... what we know is that mortgages are higher in NSW on average and other costs of living are higher than other capital cities like Adelaide and Perth," she told reporters.

"Families really are doing it tough... many in NSW have already given so much in charitable giving and will have to pay more through rising food and other costs as a result of the floods."

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