Australia's cruel summer of cyclones and floods could generate a new, devastating political storm for Prime Minister Julia Gillard, who now must buck hostile public opinion to find a way to pay for the clean-up.

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. Now she will pick up responsibility for a disasters bill likely to top $10 billion (6 billion pounds).

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 Anna Bligh, a direct descendant of Captain William Bligh of Bounty mutiny fame, 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 destroyed crops and infrastructure across northeastern Australia, particularly in Queensland, where at least 35 people were killed, 30,000 houses inundated and roads, bridges and rail lines wiped out.

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

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


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.

Australia's central bank on Friday further complicated the task for Gillard, suggesting that it was prepared to raise interest rates again at some point to head off inflation, despite short-term impact from the recent disasters.

The Reserve Bank of Australia's outlook raised economists' expectations of higher home loan interest rates later this year, a further political headache for Gillard in a country where rising mortgage rates are political poison.

She is already embroiled in a battle over how to pay for the disaster recovery and to maintain her plan to wipe out the budget deficit by 2012/13 (July/June).

Australian Financial Review political editor Laura Tingle said the fight over the floods tax could eventually be an opportunity to strengthen 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, Tingle wrote on Friday.

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 $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, Gillard will introduce laws to impose the floods tax to raise A$1.8 billion (1.1 billion pounds), but there is still no clear sign that the measure will secure passage.

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

The Greens and independents have so far withheld support for the tax and want more concessions before making a final decision, leaving 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 Gillard's current plan, the tax will run for 12 months from July 2011 and be accompanied by A$2.8 billion of spending cuts and a further A$1.8 billion savings from delaying some infrastructure spending.