27 January 2011 –The Government will spend $5.6 billion to rebuild flood-affected regions across Australia, PM Julia Gillard announced today.

The funds will be delivered through a one year levy on people earning more than $50 000, abolishing certain climate change programs such as the green car innovation fund, the solar hot water rebate  and capping funding for the renewable energy bonus scheme.

Some infrastructure projects will also be deferred to save cash as well as free up skilled workers.

The Australian Greens, while supporting the flood levy, insist that the climate program cuts make no sense.  Australian Greens Acting Leader, Senator Christine Milne, said , “It beggars belief that the government would choose to cut climate change programs like solar flagships, energy efficiency and the solar hot water rebate to fund disaster relief when such disasters will be made worse by climate change.

The Greens have proposed deferring the top end corporate tax cuts planned for July 1 2013, while keeping the cuts for small business. This would net the government around $1.7 billion in the forward estimates, protect low income earners and small businesses and enable the government to reverse its decision to cut critical climate programs.

“The Greens see establishing a long-term, well-resourced disaster relief fund as a high priority in the face of climate change,” Senator Milne said.

Spending cuts
Among green programs to but cut or scaled back will be the solar flagship programs, priority regional infrastrucutre, renewable energy, green start porgram and solar homes and communities.

Cuts, worth a total of $2.8 billion, include:

  • 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 Government will spend most of the $5.6 billion on rebuilding essential infrastructure. Two-thirds of this funding will be delivered through spending cuts. The other third will be provided by a one-year progressive levy that won’t be paid by people directly affected by the floods or by low-income earners.

Funding will come from the following measures:

  • $1 billion in delaying some infrastructure projects, freeing 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
  • $2.8 billion in spending cuts (as above)

Highlights of the Prime Minister’s media statement said:

The Government recognised many Australians had already donated to people affected by the floods. This was a great contribution, but entirely separate from the job of rebuilding essential infrastructure in flood-affected regions.
To ensure recovery and rebuilding can start as soon as possible the Queensland Government will receive an advance payment of $2 billion.  The Government will rebuild Queensland while delivering the budget surplus as promised in 2012-13.
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 are around $5 billio. 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 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.

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.

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, the government statement said.


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