At the time of writing, residents in Queensland, Australia have been coping with a cyclone. Given the events which the people of the state have faced over the past couple of months, they might be forgiven for feeling that they had incurred some sort of supernatural wrath. The floods which blighted the state have left a massive job of repair. The Australian government have suggested that initial estimates of the cost of the work required will be around A$5.6 billion (£3.5 billion). The commitment of the government to help Queenslanders has not been questioned; what has is the way in which the cost is funded.

The solution the government has put forward is to ask all Australians to help their fellow citizens by paying a 'flood tax' . The tax of 0.5 per cent will be levied on taxable income between A$50 000 (around £31 000) and A$100 000 with those earning more than A$100 000 paying 1 per cent. The tax will commence in July. Those directly affected by the floods as well as those on taxable incomes below A$50 000 will not be expected to pay the tax. It is expected that the tax will raise around A$1.8 billion. The remainder of the money will come from cuts elsewhere in the budget.

It is being reported that many Australians feel the tax is fair and that they are happy to contribute between A$1 and A$5 a week in tax to help fund the flood repairs. However, the Australian Parliament may not see it quite that way and it is possible that the Labor government will have to rely on support to get the bill into legislation. The debate on the fairness of the tax goes a little wider than simply whether it is fair to ask all Australians to contribute.

Some are suggesting that a nation-wide tax will damage growth prospects elsewhere in Australia. The country has suffered from the recession and the recovery, like those in many other countries, is fragile. Increasing taxes and diverting resources from other uses at this time could cause economic growth in other areas of the country to be hit, argue critics of the plan. Opponents also claim that the government could have increased the budget deficit by borrowing to fund the clean-up without damaging other parts of the economy and without any major effect on interest rates.