James Grubel: Disasters tax could heap more pressure on Australian PM

Labour leader Ms Gillard, who holds a paper-thin majority in parliament, missed out on being cast as heroine in the nation's hour of need, losing that role to the premier of disaster-stricken Queensland state, Anna Bligh. Now she will pick up responsibility for a disaster bill likely to top A$10 billion (6.2bn).

"The prime minister has left a lot of people cold this past few weeks," David Pemberthy, editor in chief of online newspaper The Punch, wrote on Friday.

By contrast, Queensland premier Ms Bligh, a direct descendant of Captain William Bligh of Bounty mutiny notoriety, has won widespread praise for her management of the disasters and could be the only politician to reap any political benefits.

The floods and Cyclone Yasi destroyed crops and infrastructure across north-eastern Australia, particularly in Queensland, where at least 35 people were killed, 30,000 houses swamped and roads, bridges and railway lines wiped out.

Parliament resumes next week and Ms Gillard, who relies on three independents and one Green MP to ensure her Labour Party government's one-seat majority, faces a fight over her plan to impose a temporary tax to cover the damages' bill

It is a fight Ms Gillard needs to win to show she can effectively run the government, and to head off currently muted complaints within her own party over her leadership and her inability to lift Labour's fortunes in the opinion polls.

The proposed temporary "floods tax" on middle to high income-earners has produced a firestorm of protest on radio phone-in shows and its passage is set to be a major test of her political character.

"Winning that battle looms as make or break for Gillard, already in a weakened position and struggling to project confidence and authority to the community," Courier Mail newspaper political editor Dennis Atkins wrote.

Australian Financial Review political editor Laura Tingle said the fight over the floods tax could eventually be an opportunity to strengthen Ms Gillard politically over opposition leader Tony Abbott.

"Labour has to break out of its defensive mindset of 2010, learn to make unpopular decisions into winners and provoke Abbott into making mistakes," Ms Tingle said.

"Voters might not have warmed to her. (But] Gillard is trying to slowly build some grudging respect."

The national budget has been set back by A$5.6 billion due to the floods, and there is no estimate yet of the cost of damage inflicted this week by Cyclone Yasi, though it will be much smaller. Queensland will also pick up a big share of the costs.

The government wants to polish its fiscal credentials before the next election, due in late 2013, to counter withering opposition attacks on its reputation for economic management - already dented by some wasteful stimulus spending since 2008.

Next Thursday, Ms Gillard will introduce laws to impose the floods tax to raise A$1.8bn, but there is still no clear sign that the measure will be passed.

The move has clearly prompted anger among many people who had already made donations to flood appeals. An Essential Media poll found only 39 per cent public approval.

The Greens and independents have so far withheld support for the tax and want more concessions before making a final decision, leaving Ms Gillard's plan in doubt.

Some opponents want the flood costs funded wholly from budget cuts or borrowing, which would further dampen her hopes of producing a budget surplus before the next election.

Under Ms Gillard's current plan, the tax will run for 12 months from July this year and be accompanied by A$2.8bn of spending cuts and a further A$1.8bn savings from delaying some major spending on infrastructure.