Australia imposes new tax to fund flood recovery

Australia imposed a temporary new tax on Thursday to help fund a multi-billion-dollar rebuilding program after floods devastated infrastructure and ruined thousands of homes and businesses across the eastern seaboard over the past month.

The floods shut coal mines, ruined crops, washed away roads and rail lines, damaged bridges and destroyed thousands of buildings across three major states, killing 35 people and causing damage estimated at up to $10 billion or more.

Prime Minister Julia Gillard announced a new income tax to raise A$1.8 billion, at a rate of 0.5 percent on annual income exceeding A$50,000 ($49,900) and 1 percent on income over A$100,000. Flood-stricken households are exempt.

“As I reflect on these floods and what has happened, I can’t escape the sadness,” Gillard said. “None of us can.

“But then I look forward and I know what needs to be done: investing in rebuilding, investing in future growth, managing demand, reforming for the future. That’s what we will do.”

Gillard said the national government would also curb spending on other areas to help patch up its budget, which faced flood costs of around A$5.6 billion. The governments of flood-affected states will also contribute flood recovery funds.

She said the floods would cut national economic growth by half a percent in the fiscal year to June 30, though economists expect the rebuilding effort will add to growth in 2011-12.

The new tax will only apply in 2011-12.

The government still aims to wipe out its budget deficit by 2012-13.