QUEENSLAND has been issued its strongest warning yet that it may be forced to take out costly disaster insurance that could further cripple the state's struggling budget.
The matter, that will potentially cost Queensland billions, is a likely trading card for Prime Minister Julia Gillard, who needs to secure the support of Senator Nick Xenophon to get her controversial $1.8 billion flood levy through the Parliament.
Senator Xenophon is holding out, determined to make a deal that will effectively force Queensland to take out expensive disaster insurance.
Yesterday, Federal Treasurer Wayne Swan and Finance Minister Penny Wong both signalled the Government was closely considering the matter.
"I think it is probably timely for us to evaluate (the insurance issue), to have a good hard look ... to see what the implications for the future are," Mr Swan told Network 10.
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Queensland chose not to reinsure for disasters, with the Government preferring to rely instead on a long-held deal whereby the Commonwealth will cover up to 75 per cent of the damage bill.
But state Treasurer Andrew Fraser said no Australian state had the type of insurance that would cover the costs of Queensland's 2011 summer of disaster.
"It is important for Senator Xenophon to understand that getting reinsurance for Queensland is an entirely different proposition than getting reinsurance for South Australia," Mr Fraser said.
"Queenslanders are relying on Canberra politicians to pass the disaster funding package so we can accelerate the recovery and reconstruction effort."
Speculation is mounting that the Federal Government might propose funding disincentives for states without insurance, in terms of limiting access to the national disaster fund. Senator Xenophon welcomed the idea.
"Now's the time to fix this up so that taxpayers aren't left with a future bill for any other natural disasters," he said.
