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Threat of more cuts in pipeline

Prime Minister Julia Gillard.JULIA GILLARD has warned she will slash spending further if necessary as she unveiled a $5.6 billion flood plan comprising a $1.8 billion one-off tax rise for middle and high income earners and $3.8 billion in scrapped or deferred greenhouse, industry and road programs.

The $5.6 billion plan, the first estimate of the infrastructure damage bill from flood-affected Queensland and Victoria, risked blowing out, she said, and any further impost would be met by cutting the budget rather than raising the levy.

The government avoided a temporary increase to the Medicare levy and instead increased income tax levels.

For a year beginning from July 1, income tax on earnings between $50,001 and $100,000 will be increased 0.5 per cent and on earnings over $100,000 by 1 per cent.

About 4.8 million workers will pay the extra tax, while everybody on $50,000 and under, as well as people affected by the floods, will be exempt.

The Opposition Leader, Tony Abbott, who will visit the flood-ravaged Lockyer Valley today, said the $1.8 billion should have been found by more budget cuts and the Coalition would oppose the levy. He was defied by the West Australian Liberal Premier, Colin Barnett, who said ”most West Australians are willing to contribute a little bit more to help Queensland get back to its feet”.

The Queensland Premier, Anna Bligh, said she understood ”no one wants to pay more but the people of Queensland didn’t want this disaster either”.

Ms Gillard stressed the levy and budget cuts would pay for infrastructure only, not disaster relief or helping the uninsured.

She revealed the floods would wipe 0.5 of a percentage point off economic growth this year.

The budget cuts include the abolition of the $430 million ”cash for clunkers” election promise, and the $234 million remaining in the Green Car Innovation Fund. Another $500 million in solar energy programs was scrapped and road projects worth $1 billion were deferred between one and three years so the funds and labour could be redirected to flood areas.

Ms Gillard also axed Kevin Rudd’s signature carbon capture and storage program and the global carbon capture and storage institute.

It is understood the Industry Minister, Kim Carr, was angry at the cuts to business, especially the green car fund, and he expressed his anger in cabinet yesterday, arguing manufacturing was a priority area for assistance.

A senior source said the scrapping of the carbon reduction policies was ”a clear message that we are clearing the decks” for a carbon price.

Many of the greenhouse policies had been criticised because they were expensive ways to cut emissions compared with a price on carbon. For example, cash for clunkers would reduce carbon emissions at $400 a tonne.

”The key to these carbon abatement program savings is my determination to deliver a carbon price,” Ms Gillard said.

The legislation for the spending will be introduced when Parliament resumes the week after next. The independents in both houses were all non-committal yesterday, saying they wanted to see more detail and many still wanted a permanent disaster relief fund. The Greens were open to the levy but opposed cutting the greenhouse programs.

To help with the demand for labour during reconstruction, Ms Gillard said the government would fast-track approval for temporary 457 visas to import skilled workers. There would also be relocation assistance for 4000 unemployed people moving to areas where workers were needed.

Of the $5.6 billion, $2 billion will be paid immediately to Queensland. Ms Gillard dismissed concerns money would be wasted like it was with some stimulus spending, saying it would be managed by the Queensland Reconstruction Authority. Payments to other states would be made though the Natural Disaster Relief and Recovery Arrangements.

”I want to get this done, I want to get it done quickly, and I want to get it done right,” she said.

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