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Australian PM Wins Support for Floods Tax

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TEHRAN, March 3 (ICANA) – Australian Prime Minister Julia Gillard won crucial support to pass a $1.8 billion floods tax on Thursday after agreeing to pressure state government to insure infrastructure against natural disasters.
Thursday, March 03, 2011 11:38:35 AM
Australian PM Wins Support for Floods Tax

Gillard won the support of independent Senator Nick Xenophon, ensuring laws for the 12-month tax will now be passed through parliament in late March and ending a prolonged political row over how to pay to rebuild after a series of natural disasters over the summer, Reuters reported.

Under the deal with Xenophon, state governments will need to have adequate capital or insurance cover for essential public infrastructure, or that state will face cuts in the amount of national disaster funding.

"This is about sending a clear message to all state and territory governments that the days of gambling with other people's money is over," Xenophon said.

Summer floods and cyclones killed more than 35 people and swamped more than 30,000 homes in the northern Queensland state alone, destroying roads, bridges and rail lines and disrupting coal exports from the key coal-mining state.

Floods also hit the states of New South Wales, Victoria and Western Australia.

Insurers such as Insurance Australia Group, Suncorp, QBE and reinsurers together are expected to pay A$2.5 billion ($2.54 billion)in insurance claims arising from the recent floods and cyclone in the country. The costs have raised concerns that insurance premiums will rise.

The floods, and a devastating category five cyclone which hit Queensland in February, left the national government with a reconstruction bill of at least $5.6 billion, which covers 75 percent of lost infrastructure.

Xenophon had withheld support for the floods tax because the Queensland state government had not taken out insurance for its key infrastructure.

Xenophon said Queensland, Tasmania and the Northern Territory had no disaster insurance on their infrastructure, even though affordable insurance was available.

The new insurance rules will not affect national government funding for the summer disasters, but will be in place for future disasters, Xenophon said.

Gillard said national disaster funding was not designed to replace insurance against national disasters.

"States and territories have a responsibility to taxpayers to put in place cost effective insurance arrangements - for example through commercial insurance and reinsurance or other mechanisms such as self-insurance," Gillard said.

The deal to pass the new floods tax is a major political victory for Gillard, who's minority government needs support from the Greens and independent lawmakers to pass laws through parliament after last August's dead-heat elections.

The government announced the tax to help protect its plan to return the budget to surplus by July 2013 after running up big deficits for stimulus spending linked to the global financial crisis.

But the victory on the floods tax came at a cost, with Gillard overturning $100 million of cuts to environment programmes to win support from the Greens, and with $50 million for higher education to win support from independent Andrew Wilkie. ($1 = 0.984 Australian Dollars)

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