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Warning over Australian economy

The deputy prime minister has warned that extensive flooding and storm damage could shrink Australia's economy, as he prepared to seek Parliament's approval for a new tax to pay for what could be the country's costliest natural disaster.

Deputy prime minister Wayne Swan, the government's ranking financial minister, told The Australian newspaper that there could be a seven billion US dollar (£4.3 billion) collapse in coal and farm exports as a result of recent flooding and a cyclone last week.

He said that could cause the economy to contract in the first three months of this year, in what would be the first contraction of Australia's economy since 2008. "There is no doubt that the natural disasters will thump our economy in the first quarter," Mr Swan said.

Officials estimated last month that weeks of flooding in Australia's north-eastern state of Queensland would cost the government at least 5.6 billion US dollars (£3.4 billion).

The added cost of Cyclone Yasi, which struck the Queensland coast last week, has yet to be calculated.

On Thursday, Mr Swan plans to introduce a temporary flood tax bill to Parliament that would raise 1.8 billion dollars (£1.1 billion) over a year to help pay for railways, bridges, ports and other installations damaged by the flooding.

The government will need the support of at least three independent politicians and one from the minor Greens party to pass the tax bill through the House of Representatives because the major opposition party opposes any new tax.

Opposition leader Tony Abbott said the government should find money for rebuilding Australia by slashing spending by two billion US dollars (£1.2 billion), including cutting 400 million US dollars (£248 million) in foreign aid to Indonesia to build schools. "With so many schools destroyed or damaged in Australia, we do think that charity begins at home," Mr Abbott told reporters.

The government has said that the flooding alone - which claimed 35 lives and damaged or destroyed more than 35,000 homes - could prove to be the nation's most expensive natural disaster.

The government predicted in November, before the floods, that the economy would grow by 3.25% in the current fiscal year ending June 30.


From Belfast Telegraph