Gillard suggests a Levy, Abbott suggests stopping the NBN, and Brown suggests that the miners stump up the money.

There is another way.  The government can give flood victims credit to rebuild their homes and businesses and the victims can repay from their future taxes.  We are already familiar with the idea with the Higher Education Contribution Scheme invented by Prof Bruce Chapman of the ANU. Commercialisation Australia uses it to encourage innovation in industry.

Whether victims have to pay extra tax to repay the loan, whether there is interest on the loan, and how large we make the loans are all political decisions not economic ones. Loans whose repayment are contingent on future earnings are the most economically efficient method to provide assistance for disaster victims.

This approach lets victims rebuild using their future income rather than the current approach which rebuilds using the whole communities past taxes and savings. The approach does not affect the government’s balance sheet because the loans are given to taxpayers.  While it might appear inflationary it will not be inflationary if there are no restrictions on where the money is spent and when it is spent – as long as it is spent on rebuilding the equivalent lost assets.

The same approach can be used with Councils and with the Queensland State Government rebuilding efforts. Give them credit and expect it to be repaid from future taxes.

One thought on “Funds for Queensland Flood Relief

  1. Kevin –

    The “jury” is not out yet on who should be deemed responsible for the flood damages. The Queensland government was offered insurance after the 1974 floods…they knocked it back. This same State Government is clearly responsible for it’s failure to make changes to the landscape and engineering initiatives that have been available to them to at least provide a reduction in the scale of damage wrought on these towns and properties…but they sat on their hands and did nothing. Provide loans to the unfortunates to pay back over many years to re-build the homes that should be still standing?…..I would rather see a “class-action” started by all those who lost everything because of a tardy and irresponsible Government…………Where is “all that money” that was raised by the flood appeals?..it must be gathering heaps of “interest” somewhere. The anger has been mostly directed at the insurance industry which must suit the Qld Govt just fine.

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