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Tax proposed to fund floods relief

The Australian government has proposed a tax to partially recoup the more than five billion Australian dollars (£3.1 billion) it expects to spend on rebuilding after major flooding.

Prime minister Julia Gillard announced the temporary tax would apply to Australians on above-average incomes from July and raise 1.8 billion dollars to pay for the massive destruction from weeks of flooding along the east coast that is continuing further south.

But the new tax will need the support of independent politicians to become law when legislation is introduced to parliament next month, and the main opposition party has said it opposes it.

The flooding has claimed 35 lives and damaged or destroyed 30,000 homes and businesses, and initial estimates of the damage bill and cost of emergency grants to flood-affected communities for the federal government is 5.6 billion Australian dollars (£3.5 billion).

The federal government is to pay 75% of the cost of rebuilding infrastructure such as roads and ports, while state and local governments will pay 25%.

The government plans to cut spending in other areas including clean energy industry incentives to make up the remainder of the bill for infrastructure.

"In time, it may prove to be the most expensive natural disaster our nation has ever seen," Ms Gillard told the National Press Club.

She said the government expected the floods to shave 0.5% from Australia's gross domestic product, which the government predicted in November would grow by 3.25% in the current fiscal year ending June 30.

The legislation is to be introduced to parliament next month. The main opposition party opposes it, but the measure seems likely to pass because Ms Gillard's Labour Party commands a majority in the House of Representatives with the support of three independent lawmakers plus one from the minor Greens party.

Ms Gillard, whose government has vowed to make Australia one of the first developed countries to return its annual budget to surplus two years after the global economic crisis, has dismissed the prospect of borrowing to pay for the flooding damage.

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