Australia, facing a damage bill that economists say may reach US$20 billion after two months of floods, will need to make budget cuts after a cyclone this week exacerbated damage, Australian Prime Minister Julia Gillard said.
“We will go through the budget and we will make some choices,” Gillard told Channel Ten’s Meet The Press program yesterday. “There are no easy choices left now, so in making further budget cuts, there is going to be some pain.”
Destruction to Australia’s roads and crops may add to the burden on economic growth and inflation, leading to the government to reassess its budget due on May 10, Australian Finance Minister Penny Wong said on Friday.
Cyclone Yasi tore through Queensland’s sugar and banana-producing areas last week, adding to the rain and flooding that left 35 people dead and disrupted coal mining.
The government on Jan. 27 announced a A$1.8 billion (US$1.82 billion) levy on middle and high-income earners as well as A$2.8 billion in budget cuts and A$1 billion in delayed infrastructure projects to pay for the rebuilding.
The government won’t increase the levy, Gillard said yesterday, even as the aftermath of Yasi triggered flood warnings in four states.
Flood warnings are in place in areas of Queensland, New South Wales and Victoria, while regions of South Australia state have been issued with alerts for severe thunderstorms, the Bureau of Meteorology said on its Web site.
Several towns in Victoria were evacuated overnight because of flash flooding, Lachlan Quick of Victoria’s State Emergency Service said in a telephone interview yesterday.
Loans of up to A$100,000 should be made available to businesses in declared disaster areas that aren’t eligible for existing relief loans and have experienced a significant financial burden because of the floods, opposition leader Tony Abbott said in a statement yesterday.
The cost of rebuilding after Yasi will be “considerably higher” than A$2 billion, Stephen Roberts, senior economist at Nomura Australia Ltd, wrote in a report on Thursday.
Yasi will trim economic growth 0.6 percentage points in the first quarter and mean higher banana, beef and sugar prices, he wrote.
The government remains committed to delivering a surplus in the financial year ending June 30, 2013, Wong said on Friday.
Queensland contributes about 19 percent of Australia’s economic output, producing about 80 percent of the country’s coking coal, and is responsible for 10 percent of its exports, Australian Treasurer Wayne Swan said last month.