7 Feb 2011

This Government Needs Disaster Relief

By Ben Eltham
There's only one entity that can foot the bill for flood rebuilding - and that's the state. So why is the ALP struggling to argue for vital government spending, asks Ben Eltham
Parliament returns tomorrow after a summer recess that has been dominated by natural disasters in Queensland and Victoria. We might have hoped that in the face of such terrible events, Australia's politicians would have abandon their normal combativeness and work together to address the problems at hand. That hasn't happened.

The natural disasters facing Queensland highlight the sharp divides in Australia's body politic. Julia Gillard's flood levy is a case in point. While everyone can laud the generosity of our fellow citizens in donating to the flood appeal, there have been many ready to criticise the Government for asking taxpayers to chip in. This is despite the fact that the flood appeal will donate money to affected individuals, while the flood levy's declared aim is to rebuild essential infrastructure.

Perhaps it is time we were more honest about the limits of philanthropy. There is no likelihood that ordinary donations will make up anywhere near the $5.6 billion that Commonwealth estimates will be required to rebuild in Queensland — and that was before Yasi struck. By Saturday, the Queensland Premier's flood appeal had raised $201 million — a wonderful show of generosity, but small change compared to the full costs of repairing the destruction.

The difficult politics of natural disasters have challenged both leaders in recent weeks. Gillard was criticised for appearing wooden in her press conferences in Queensland, while Abbott has had to contend with a controversial fundraising email.

Today's Newspoll is further evidence of how finely balanced voting intentions remain. Support for the levy is split along party lines, with 73 per cent of Labor voters supporting it and 62 per cent of Coalition voters against it. That's about as much good news as Julia Gillard and her government can glean from the first big poll of the year. Labor's two-party preferred vote is down to 48-52 and Labor's primary vote has dropped to a perilous 32 per cent. Nor does the Prime Minister herself appear to be impressing voters, with her personal approval ratings eroding.

As with any poll taken in isolation, the usual caveats of significance and margin of error must apply. Unfortunately, applying such caveats would stop journalists from speculating on Gillard's future as leader — and no-one expects them to do that.

In fact, the past week has been a good one for a government which consistently finds it difficult to get on the front foot. Much of this is the government's own fault: Labor's approach to policy is fragmented and its media strategy is often clumsy. The flood levy itself is designed to keep the budget in surplus in 2012-13 — a meaningless fiscal goal, driven by Labor's desperate fear of the Coalition's attacks on its spending.

If the budget were to return to surplus a year later, but with a stronger bottom line, the end result for public finances would be essentially identical. Indeed, as Ian McAuley observed here last week, there is a strong case for the government to be borrowing more money at today's rock-bottom bond rates, in order to invest in infrastructure that will deliver a positive net return.

But Labor has conceded the argument on fiscal policy to Abbott and the Opposition, and so the Government will do whatever it takes to deliver a surplus in 2012-13. Such are the political "realities" that modern Labor prides itself on understanding.

The result is a series of entirely unnecessary cuts to what should be cherished Labor programs — like the National Rental Affordability Scheme (NRAS).

As Julian Disney, the leading Australian expert on housing affordability, has noted, the NRAS is performing well and delivering results. Given Labor's image problems when it comes to the efficacy of its spending programs, you would have thought it would have been the last thing the government would axe. But, as Disney has noted, the Government's commitment to affordable housing seems to have waned since taking office.

The position of Housing Minister, where Tanya Plibersek was performing well, has been abolished, and we've barely heard a peep out of Tony Burke since the reshuffle. Nor has Australia's housing affordability problem gone away — if anything, it has worsened, with thousands of homes in Queensland destroyed. As Disney writes, the decision "is ill-considered and disturbingly short-sighted."

That's what happens when you make policy on the run. The much-criticised Cleaner Car Rebate Scheme (better known as "cash-for-clunkers"), also cut in last week's announcement, will not be mourned by many. But as Sean Carney pointed out over the weekend, the program is only six months old. It was announced on 24 July 2010, in the wake of Gillard's disastrous airing of a proposal for a citizen's assembly on climate change.

Cash-for-clunkers was never good policy, costing taxpayers exorbitant amounts in return for minimal reductions in greenhouse gas emissions. Even so, to junk a policy only six months after announcing it shows Labor's continuing inability to separate policy fundamentals from media spin.

What Australia really needs is a comprehensive response to climate change, including a price on carbon. But does anyone believe this Labor government can deliver that?

Mind you, Tony Abbott hasn't had a good week either. By now we've come to expect ferocious opposition from the leader of the Opposition. But on this occasion it got him into trouble when an unfortunate email from Liberal Party headquarters asking for a donation to fight against the flood levy was made public. The insensitivity of calling for donations to attack a disaster relief levy as tropical cyclone Yasi moved towards Queensland's coast was breathtaking. But it was also par for the course for a party deep in debt  and convinced of the illegitimacy of Gillard's government.

Laurie Oakes even used to occasion to question to raise questions about Abbott's future as leader. Do journalists think about anything else?

The flood levy debate shows, yet again, the poverty of politics-as-usual.

In truth, there should be no debate about the role of government in rebuilding from such a disaster. More spending, financed either from debt or taxes, is the only sensible response. The reason is that in the face of a truly terrible natural disaster, no individual or business can manage their own risk.

The only agency with the resources and the wherewithal to respond to such events is the state. Disaster responses require helicopters and ships, sophisticated warning systems, and a workforce of thousands, from meteorologists to swift water rescue teams. All this takes money. Lots of it. From taxpayers.

Natural disaster responses are by their very nature a public good. Like national defence, they can't be sustained by individuals, no matter how wealthy or well insured. Like national defence, they require the full resources of the defence force — currently in one of its largest deployments in decades. And like defence, disaster responses are delivered to an entire community — in the language of economists, they are non-rivalrous and non-excludable.

This is why the arguments mounted against the flood levy by Tony Abbott and his colleagues don't stack up. Risks such as catastrophic floods or category five cyclones can only be prepared and responded to at the very highest levels of government. By its very nature, this requires taxpayers from states that have not been affected to chip in. That is the nature of pooling risk. That is the whole point of a Commonwealth.

The role of government in mitigating risk and rebuilding for the future should be home ground for a Labor government. Yet, as usual, Labor seems unable to link the day-to-day politics to a broader narrative that voters can understand. As a result, Labor keeps missing opportunities to demolish a Coalition whose fiscal credentials should make it a laughing stock.

This is an opposition whose own election costings were found by Treasury to be riddled with inconsistencies and bald-faced miscalculations (pdf). It is an opposition that proposed its own levy to pay for parental leave. It is an opposition that voted against significant money-saving measures throughout the last Parliament, like the alcopops tax or Labor's modest trimming of the private health insurance rebate.

As Rob Burgess noted today, Labor must be concerned that Abbott continues to poll so well despite all the gaffes. If the Government is to deliver on its ambitious agenda this year, it needs to stop conceding the big picture arguments before they're even debated.

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Marilyn Shepherd
Posted Monday, February 7, 2011 - 14:29

Ah yes, Newspoll. Taken before Abbott's moronic email one would suggest but who cares anyway?

Any poll is only the sum of which people you ask on a given dsy, people change their minds in a heart beat.

But it is interesting how miserly and mean the liberal voters are and they are the ones with traditionally higher incomes.

And really it is all led by the Murdoch rags with ridiculous nonsense like "if the BER had been efficient we wouldn't need a levy", as if the connection between the two things means a single thing.

I don't like Gillard, never have and never will.

But Abbott, the man who uses a major catastrophe to fund raise for his party is beyond help.

Posted Monday, February 7, 2011 - 17:15

I am not opposed in principle to a levy, but does it once again have to be paid by the middle income earner, based on taxable income?

I wrote to both the AFR and The Age before the levy was announced making alternative suggestion, and I have also written to Julia Gillard.

Why not levy it on assessible income? And here is 'why'.
Last year Frank Lowy earned $15m for running Westfield (I have no idea how many more zillions he earned elsewhere). He defended the $15m to shareholders with the comment that he was donating all that to charity. Which charity? Hardly the flood relief charity.

So, here you have $15m, assessible income, and
$0 taxable income since the donated money is tax-deductible. Lowy does not pay the flood levy on this portion of his income.

It could also be levied in form of economic rent on land values, above a certain minimum.

This user is a New Matilda supporter. Jane E
Posted Tuesday, February 8, 2011 - 12:36

Ben mentions the "limits of philanthropy" and the $201 million donated by the public to help out their afflicted fellows.
I wonder how much the resource companies are contributing. And whether the tax deductions they may receive are more or less advantageous than the concessions they already receive to conduct their business.
Regarding the "moral hazard" of government supporting bad choices made by individuals regarding where to live: many people buy a house to live in. It has been built by a builder, often a large developer, on land approved by government for the purpose. Such approval may have been granted in the context of some kind of encouragement from the developer to the governing body or bodies. In any case, it could be argued that a consumer (house buyer) has a right to expect that the house s/he buys is fit for purpose, and that could be argued to include not being situated in the path of predictable natural disaster. It is worth noting that much land subdivided for housing in recent years has previously been agricultural land, near watercourses. And increasingly further from a major metropolis, without adequate infrastructure especially for water capture, storage and disposal, or for transport.
For those who are too busy watching sport (including political polls), let me be the one to cast gloom on your Weeties: 1. Peak oil; 2. Colony collapse disorder; 3. Herbicide resistant weeds. There are also some thorny issues related to water, but those 3 will do to be getting on with. Unfortunately, our governments are not getting on with them, barely acknowledging them as issues, let alone urgent ones. On the rare occasions when any of these issues enters the mainstream debate, the opposition howls and hinders, and the mainstream media ridicules the topic and villifies the messenger.

This user is a New Matilda supporter. outrider
Posted Tuesday, February 8, 2011 - 17:09

Spot on, land approved by reckless councils pursuing Big Growth, hand in glove with big developers, sold to people who do not check for often available data on flooding.
Proper planning is the first step in avoiding flooding. Maybe houses sold in flood plain ares should have a compulsory statement to that effect on the sale document.