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No 'magic pot of money' for Australia floods: PM

Australian Prime Minister Julia Gillard today defended her plan for a one-off tax to pay for the flood disaster, insisting there was no "big pile of money" to pay for the rebuilding.
AFP | By HT Correspondent, Sydney
UPDATED ON JAN 28, 2011 12:01 PM IST

Australian Prime Minister Julia Gillard on Friday defended her plan for a one-off tax to pay for the flood disaster, insisting there was no "big pile of money" to pay for the rebuilding.

Gillard, who has been prime minister for seven months, has ordered a levy on middle and high-earning tax payers to help fund the recovery after deadly floods that devastated the northeast state of Queensland.

Conservatives have criticised the plan, with opposition leader Tony Abbott warning the levy could become permanent and accusing the government of being irresponsible with its spending.

But on Friday Gillard said she could not dip into a government contingency fund or extend a budget deficit to pay for the unprecedented deluge, which wiped out farms and flooded mines.

"It is not true to say to Australians that there is a big pile of money there that somehow I could just go and use," Gillard told the Seven Network.

"It doesn't just sit there, this is not a magic pot of money that can be rolled out in the face of an unprecedented natural disaster.

"The contingency reserve is necessary to keep the budget on track."

Asked about a Seven Network poll in which 93 percent of the 4,500 people who phoned in said they did not want to pay a levy, Gillard said she believed Australians did want to make a contribution to Queensland's recovery.

"And let's remember more is being done in budget cuts than is being asked for from Australians in a levy," she said.

The one-off tax announced Thursday aims to raise about Aus$1.8 billion ($1.8 billion) to help meet the Aus$5.6 billion cost of the La Nina-triggered floods which have also hit the southeastern states of Victoria and Tasmania.

The levy is weighted to earnings, meaning 60 percent of taxpayers will pay less than Aus$1 a week.

Gillard has stressed the revenue was needed to ensure the budget is back in surplus by 2012-2013 when the economy is expected to be running at full capacity.

"I think Australians around the country realise this is a time where we need to pull together," she told ABC Radio earlier Friday.

"We are seeing a natural disaster of unprecedented economic proportions still unfolding in our country."

Gillard, who holds a wafer-thin majority in parliament, will require the support of independents to pass legislation to impose the tax after Abbott said his conservative bloc would vote against it.

"My view is there should not be a new tax. We do not need new taxes to cope," he said.

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