Julia Gillard has welcomed independent senator Nick Xenophon’s support for the government’s floods rebuilding package, including the flood levy. Senator Xenophon, who held the final vote needed by the Prime Minister, signed up yesterday.

Ms Gillard said “this now means the floods levy will pass the Parliament, allowing us to get on with the critical job of rebuilding Australia after the devastating summer floods.”

In exchange, Senator Xenophon won significant concessions that will require state governments to take out disaster insurance or face having their access to federal funds slashed.

"Of course, we must find the funds to rebuild Queensland this time," Senator Xenophon said.

"But this overhaul will also mean we won't have to find as much money if disaster strikes anywhere in Australia ever again."

The federal government said as s a result of discussions with Senator Xenophon, Natural Disaster Relief and Recovery Arrangements (NDRRA) for future disasters will be strengthened to help ensure state and territory governments have adequate capital or insurance to fund the replacement and restoration of essential public infrastructure. These new arrangements will not apply to disasters that occurred this past summer.

Under the new arrangements states and territories will not be eligible to receive the maximum level of Commonwealth support unless they undergo regular assessments of their insurance arrangements by an independent specialist, such as the state Auditor-General.

If a state or territory has failed to take appropriate action within a reasonable time, then the amount that state or territory would be reimbursed under the NDRRA may be reduced.

“States and territories have a responsibility to taxpayers to put in place cost effective insurance arrangements – for example through commercial insurance and reinsurance or other mechanisms such as self-insurance.

“These new arrangements will reinforce that responsibility,” Ms Gillard said.