This Flood Levy is to save Gillard, not Queensland

Posted on Wed 01/26/2011 by


Andrew BoltBy Andrew Bolt

Having frittered away billions, Australian Prime Minister Julia Gillard comes asking for $3.5 billion more:

AUSTRALIANS will pay more tax under a temporary flood recovery levy set to be announced by Prime Minister Julia Gillard in Canberra tomorrow.

Ms Gillard and senior ministers, including her deputy and Treasurer Wayne Swan, Infrastructure Minister Anthony Albanese and Finance Minister Penny Wong, met yesterday to sign off on a new levy expected to raise $3.5 billion.

It is understood the favoured option is to increase the existing 1.5 per cent Medicare Levy… One suggestion is that the increase would be 0.5 per cent or less,

Peter Martin says the economy is too soft to clobber it now with a levy, which the Gillard Government needs not to rebuild Queensland but to meet its promise to return to Budget surplus by 2012-13:

It’s the wrong time to hit consumers further. The whole point of economic management is to soak businesses and consumers when times are good and to tighten up or hand money out when the times turn downward.

Professor Warwick McKibbin has been doing it for 10 years on the Reserve Bank board…. ‘’Sure, it’s important not to have too much debt,’’ he told BusinessDay. ‘’But the idea that you have to have a particular surplus at a particular point in time no matter what, is dangerous.’’

Swan and Gillard are about to lead us down a dangerous path.

There will be plenty of time to impose a levy or to slash spending when the economy is on the mend. To do it now, as the economic shockwave of the flood is about to hit, betrays enormous insecurity. They must know it matters scarcely at all to government finances whether the budget hits surplus in 2012, 2015 or 2011.

But it could matter enormously to economic management.

Christopher Joye suggests the Gillard Government’s promise of a return to surplus was already in deep trouble. He quotes a Royal Bank of Scotland analysis:

The risk of a delayed return to surplus already seems possible in that the monthly Budget data show that the deficit was running at annual rate of $60bn as at November, larger than the $42bn deficit the Commonwealth is forecasting for 2010-11 as a whole.

Here’s how it looks:

Costello, honoured today by being made a Companion in the Order of Australia, will get even more airtime with his opposition to a flood levy:

Former federal treasurer Peter Costello says the Gillard government doesn’t need a levy, or to dip into the Future Fund, to cover the cost of the flood recovery.

(Via Catallaxy Files.)

Andrew Bolt is a journalist and columnist writing for The Herald Sun in Melbourne Victoria Australia.

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Andrew Bolt’s columns appear in Melbourne’s Herald Sun, Sydney’s Daily Telegraph and Adelaide’s Advertiser. He runs the most-read political blog in Australia and is a regular commentator on Channel 9′s Today show and ABC TV’s Insiders. He will be heard from Monday to Friday at 8am on the breakfast show of new radio station MTR 1377, and his book Still Not Sorry remains very widely read.