Thursday, February 10, 2011

We think the levy is doing us good

(We don't seem to realise how small it is)

The flood levy appears to be gaining grudging respect. The latest Westpac Melbourne Institute consumer confidence survey, taken in the week after Prime Minister Gillard announced the levy shows a turnaround in views about our long-term economic health.

The answers to most of the questions were little changed from the previous survey conducted at the time the floods hit, with views about personal finances down somewhat. But when asked about economic conditions over the next 5 years confidence soared 10 per cent from negative into positive territory.

"It's unusual for answers to that question to move as much," said Westpac chief economist Bill Evans told The Age. "Usually it is views about the short-term outlook that jump around."

"You could interpret it as people believing the government is looking after the longer-term interest."

"I think that's an explanation. You obviously can't be sure, but I can't think of much else that would have done it"...

Although stronger in Queensland the rebound in views about the long-term was widespread, suggesting Australians saw the levy as a sign of good economic management whether or not they liked it.

In Parliament Treasurer Wayne Swan was unable to say how many Australians would pay the levy, which will apply only to taxpayers earning $50,000 or more a year with Australians receiving disaster recovery payments exempt.

He later said 4.84 million taxpayers earned enough to qualify with around 185,000 expected to be exempt.

Treasury expected the floods alone to knock half a percentage point from economic growth, mainly in the March quarter. Cyclone Yasi would make the impact worse.

"But the thing that we need to remember is it is not going to knock our economy off its medium-term growth path, that path is strong," the Treasurer said.

"We need revenue for rebuilding. Paying as we go has been endorsed by the Financial Times which described the choice as extraordinary, but prudent," Mr Swan told parliament.

"People might take the Leader of the Opposition seriously had he not actually come into this House on something like six occasions and supported a levy. Who was it who came into this House on 17 June 1996 to support a gun buyback levy? Who was it who came in 2001 and supported a levy for the Ansett employees?"

Mr Evans said much of the apparent appeal of the flood levy was psychological. The sums involved were too "minimal" to make much difference to budget outcomes.

Published in today's SMH and Age

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