“Clearly it is a big hit on the budget,” he told a press conference yesterday.

“It’s going to cost Queensland by and of itself a lot of money and that’s going to take us more than one year to pay for.

“It’s going to take a number of years because local governments are only just finishing the tasks of rebuilding from floods two years ago. They’re still doing that work now and they’ll be sending us the bill for two years to come.”

Meanwhile, the Gillard government has imposed a flood levy on Australians earning more than $50,000 per annum to help rebuild infrastructure and communities hit by flooding over recent months.

The spike to the Medicare levy will snap up 0.5% of taxable income for those earning $50,000-100,000 per annum, while those who earn more will get hit with a 1% flood levy.

People receiving national disaster relief assistance will not fall under the tax scheme.

The one-off tax only applies to the 2011-12 financial year and is expected to raise $1.87 billion in revenue for the federal government.

The Gillard government plans to raise the other two-thirds of the $5.6 billion through spending cuts.

Responding to questions at the press conference, Fraser said the federal government would give about $3.9 billion of these funds to the Queensland government.

Opposition Leader Tony Abbott told reporters the government should draw upon more of “the fat” in the budget.

Business Council of Australia president Graham Bradley said the Gillard government was putting the cart before the horse as the full cost of rebuilding after the floods was not yet known.

“Until we get a final assessment of the rebuilding costs, we can’t gauge the impact on the federal budget, but the first step should be to reassess spending priorities in preference to raising new taxes,” he said.