"In other words it is not like the Medicare levy, which for most taxpayers applies to all their income - it is like income tax rates which apply only above certain income levels." Someone who earns an income of $60,000 will pay just under $1 extra a week under the levy, Ms Gillard said. "A person earning $100,000 per year will pay just under an extra $5 per week," she said. The levy would apply only in the 2011-12 financial year and was expected to raise $1.8 billion, she said. "People who were affected by the floods will not pay this levy.

"Anyone who receives the Australian Government Disaster Recovery Payment for a flood this financial year will be exempt. "And importantly, this levy is completely separate from donations." Early figures suggest the direct total cost of the floods to the federal government will be $5.6 billion, including rebuilding and disaster assistance payments. Rebuilding in Queensland is estimated to cost $3.9 billion, while the damage bill for other flood-hit areas was put at $1 billion. "So that is the immediate budget challenge, to find over $5 billion," Ms Gillard said.

Short-term financial assistance to about 500,000 Australians was estimated to cost the government more than $600 million, while a recovery subsidy for small businesspeople and farmers was worth another $120 million. The floods had had an immediate impact on the economy, but the cost of disruption would also continue for some time, Ms Gillard said. "Treasury's preliminary estimates are that GDP growth in this financial year will be around half a percentage point lower due to the floods." The government would also fast-track approvals for temporary skilled migrants who work on flood rebuilding, Ms Gillard announced. "Skilled labour will be as important as funding for rebuilding," she said.

"There will be extra resources, assistance to employers and simpler processes to ensure a five-day turnaround for decision-ready applications for workers in a host of nominated occupations to work on rebuilding Queensland." The government would double the pilot of relocation assistance for people on income support and direct it to Queensland. "Up to 4000 eligible job seekers who want to get a job helping out will now receive support to move to Queensland and make a difference on the ground. "The offer to these job seekers is simple: we can get you help to get there if you can stick at the job." Ms Gillard said that, because the economy was growing and national income rising, the nation could afford to pay for flood rebuilding now.

"We must never take future growth for granted, so we should not put off to tomorrow what we are able to do today," she said. "Solely borrowing to rebuild Queensland is a soft option I am not prepared to consider." With so much new spending on the cards, Ms Gillard said the government must also take some demand out of the economy. If it did not, the cost of skilled labour and building materials would go up and other industries would struggle, she said. "[This would] ultimately spill over into higher inflation and interest rates," she said.

"So sound budget principles say we should pay as we go, and sound economic principles say we should not add to capacity pressures." Ms Gillard said the federal government would make an immediate upfront payment to Queensland of $2 billion. "With this money, rebuilding can start in the more than 60 flood-affected communities across Queensland," she said. "The payment will be made in the current financial year as soon as financial controls and arrangements are finalised." Ms Gillard said she was acutely conscious of the desire of the Queensland government to use its powers to cut through red tape and deliver rebuilding as fast as it could.

"I want to ensure that nothing in the funding arrangements holds them up." Australians expect that, while the government rebuilds after the floods, it must also not lose sight of its long-term reform agenda, Ms Gillard said. "Australians rightly expect their government to be able to do more than one thing at the same time." She recommitted the government to delivering the national broadband network, its education reforms, improving health care and making long-term decisions about pricing carbon. "That's my job and that's what I'll do."

Spending cuts The $5.6 billion damage bill would be funded through a variety of ways, Ms Gillard said. The levy will provide $1.8 billion, while another $1 billion will be found through delaying some infrastructure projects. That will free up funds as well as skilled workers, although they're unlikely to have trouble finding another job given the skilled labour shortage, Ms Gillard said. The government will also deliver $2.8 billion in spending cuts, including removing industry assistance.

The government will also delay or reduce infrastructure projects to save approximately $675 million. "Over coming days I will be discussing these projects directly with the affected state governments before the minister for infrastructure publicly announces the details of our changes," Ms Gillard said. "The savings from these infrastructure decisions make a major contribution to funding the rebuilding. "Perhaps even more important, these decisions will free up skilled labour for rebuilding." The government will cut and cap spending in other areas too.

"I am abolishing, deferring and capping access to a number of carbon abatement programs," Ms Gillard said. These include the Green Car Innovation Fund, Cleaner Car Rebate Scheme, the Carbon Capture and Storage Flagships and Solar Flagships, the Solar Hot Water Rebate, Green Start Program, Solar Homes and Communities Plan and the Global Carbon Capture and Storage Institute. "The key to these carbon abatement program savings is my determination to deliver a carbon price." Some of these policies are less efficient than a carbon price and will no longer be necessary, Ms Gillard said. Ms Gillard said up to 4000 eligible job seekers who want to help rebuild Queensland will get support to move there.

"The offer to these job seekers is simple: we can get you help to get there if you can stick at the job," she said. Ms Gillard added that $2 would be saved in spending cuts for every dollar raised through the levy. Asked about what checks and safeguards had been put in place to ensure money was not wasted and recovery programs were not rorted, Ms Gillard said: "I want to get this done, I want to get it done quickly and I want to get it right. "And that means I want value for money for Australians." Ms Gillard said the Commonwealth would have two representatives on the flood recovery taskforce led by Major General Mick Slater from the Australian Defence Force.

The Department of Immigration and Citizenship advised her the fast-tracking of skilled migrant visas was feasible. "They assure me that what I have pledged today can be done and can be done with proper checking," she said. Ms Gillard stressed the levy would apply only to earnings over and above the $50,000 mark. "If you take the example of someone who earns $50,001 per year, they pay the levy on the one dollar - this is not designed like the Medicare levy," she said. Asked if the government would reconsider the proposed spending cuts and the levy should Australia's economic position improve, Ms Gillard said it was unlikely the damage bill would be better than forecast.

"It wouldn't be under what I've indicated today," she said. Asked if the government would increase the levy or make further budget cuts if the floods bill was to rise, Ms Gillard said: "The money will come from cuts somewhere else." Anyone found eligible for the Australian Government Disaster Recovery Payment would be exempt from the levy. "If you had access [to] that payment then you will file a form with your employer and the levy will not be taken out of your pay packet. "So that is our way of identifying flood-affected people because they were eligible for that payment."

Anyone who for any reason did not file the form would have the levy rebated to them at tax time, Ms Gillard said. Ms Gillard said she did not regret the fact Labor had handed out money to the public in 2009 as part of its economic stimulus package. "It helps us to meet the challenge of paying this flood rebuilding package that we are coming to that challenge with our economy strong," she said. Ms Gillard denied the government would be overstretched now it had to deal with the flood recovery on top of all its other commitments. "I've deliberately planned this year so we can deal with our priorities in a methodical way, a step at a time," she said.

"I've charted a course in my own mind and in some (cabinet) documentation. "It's a manageable work agenda, it's a challenging work agenda ... but we can get our way through it and we will." Ms Gillard said the Green Car Innovation Fund would be axed although the government would honour committed spending. "So, you'll continue to see some expenditure in the forward estimates period which is already committed," she said. The Cleaner Car Rebate Scheme will not proceed.

There will be a mix of saving and deferring of the Carbon Capture and Storage Flagships and Solar Flagships schemes. There is a demand management system in place for the Solar Hot Water Rebate scheme which will run out. The Green Start program will not go ahead and there will be some reductions and re-profiling of the Global Carbon Capture and Storage Institute. Legislation imposing the levy needs to be passed by both houses of Parliament where Labor lacks a majority. Ms Gillard said she had spoken to key lower house independent MPs Tony Windsor and Rob Oakeshott, but that was to keep them abreast of proposed cuts to the deal they struck for regional Australia when they helped Labor form government last year.

Asked about how she will sell the levy to her fellow parliamentarians, Ms Gillard said the message was simple. "This is in the interests of the people of Queensland. "This is in the interests of people who are flood affected, this is in our economic interest and so we should get it done." Australians across the country had banded together in the aftermath of the floods, and politicians would be expected to do the same, she said, despite admitting that the levy was "controversial". The Coalition thinks the flood recovery can be done without imposing a levy, which opposition treasury spokesman Joe Hockey has labelled "plain stupid, dumb stuff".

Ms Gillard had a separate message for the Coalition. "If it was good enough to actually say you would impose a levy to fund [your] election commitments, how can it not be good enough to have a levy to fund the rebuilding of Queensland? "How can you possibly justify that?" Ms Gillard said she would brief lower house rural independents and other parliamentarians on the package in the weeks ahead. "I will be saying very clearly to each of them this is the right package and people should come to the Parliament to support it," she said.

Ms Gillard called on the Coalition to get behind the package and overcome its "opposition for opposition's sake". Loading The Queensland Recovery Authority would draw on the experiences of the Victorian authority, set up in the wake of the 2009 bushfires, she said. AAP