Business News

Flood levy is poor relief

by Peter Switzer

No one can begrudge the nation helping out the unlucky Australians who have been devastated by the relentless rains and floods that have rushed through Queensland and are now into Victoria, but we can be critical of a Government that opts for a levy, which The Age newspaper says will target the ‘rich’!

It will be interesting to see whom the Gillard Government defines as rich and we should find that out today. It’s ironic and unfair, some might think, that generous givers to the post-flood appeals will now be slugged with a levy.

As Homer Simpson might lament: “Doh!”

Of course, it’s a damnation on past Governments as well that we haven’t had a national disaster relief fund already in place. After all, we get a flood, a bushfire, a drought or some other ‘Act of God’ nearly every year that wields impoverishment on some small group of Aussies.

What else is damming is that our leaders always go for the obvious “let’s tax someone” to fix a problem when there are better ways, which might take some lateral thinking, to fix a problem.

Budget deficit OK

In the short-term, the Government could allow the budget to go into deficit to cover the immediate spending needs for those affected by the flood. Right now the Aussie economy is teetering on the brink of going into negative growth for the March quarter and the floods impact on demand could make it happen.

Remember, the economy is already being slugged by too-high interest rates and a very strong dollar, and so another tax slug or levy won’t do anything to help consumer demand.

It’s unfortunate that Governments nowadays try to establish their economic credentials by talking tough on subjects such as returning the budget to surplus. This is a great idea when an economy is strong but when it’s being battered, it’s okay to run a deficit.

In fact, Warwick McKibbin, one of the country’s best economists and a man who has been on the Reserve Bank board for the past two terms makes this point today in The Australian newspaper.

McKibbin was one of the few economists who agreed with me in early 2009 that Australia could avoid a recession when the GFC hit — I remember because I didn’t have many supporters on this subject.

The Prime Minister tells us that 2012 will be a big year for growth and that will help meet the funding challenges of rebuilding Queensland. Also right now our mining companies are doing well and they will be paying a lot of company tax as a consequence — that should help bankroll the spending job ahead.

Compulsory insurance

On another front, I hope Ms Gillard talks about what will happen in the future. People who live on floodplains should be compelled to have flood insurance, just as car owners have to have compulsory third party insurance.

I live in a suburb where apparently thieves love to do business, and so I pay a higher insurance premium. It should be a national understanding that if you live in a flood-prone area you must have insurance.

There could be council levies, or insurers might need to load up the premiums but these companies must be compelled to pay up and not use the fine print in a contract to escape their obligations. This all rests on a Government taking the lead to fix this national disgrace that we punt that nothing will go wrong. And like most punters, we lose most of the time.

Leadership challenge

If today the PM only talks about levies, then she will have failed the leadership challenge and this could explain why we, as a country, voted in such a dysfunctional parliament at the last election!