SYDNEY, Jan 23: Australian Treasurer Wayne Swan on Sunday warned that 'epic' flooding that has hit 3.1 million people across the nation would require difficult decisions, as the wall of water threatened more towns.

Mr Swan said strong population growth and development meant the deluge had wrought unprecedented damage, hitting many more homes and businesses than major floods and cyclones in the 1970s or the 2009 wildfires, which killed 173 people.

“The exact impact of this epic disaster on our budget will be accounted for in time, but there's no doubting the final tally will be very significant,” said Mr Swan in his first weekly economic note for 2011.

“There is no doubt the recent floods will rank as one of the most costly natural disasters in our history.”

Mr Swan said the “enormous” recovery effort ahead would require “difficult spending cuts in our budget, and we're working through all the options --- including a temporary levy.”

Levies were used in the past to fund a gun buyback after the 1996 Port Arthur massacre in which 35 people died, to protect staff entitlements after flagship airline Ansett collapsed in 2001, and to support the dairy and sugar industries, Mr Swan said.

“We are determined to do all that we responsibly can to throw our support behind the Queensland people through this devastating time, but at the same time we have to do the right thing by the nation's economy,” he said.

The muddy waters continued their march through southern Victoria state on Sunday, surrounding the town of Swan Hill and nearby villages. Emergency officials delivered 120,000 sandbags to residents there.

The floods have already swamped an area larger than France and Germany combined in northeastern Queensland state, where two sets of what appeared to be human remains were found in the Lockyer Valley and nearby Lowood.

At least 20 people were killed in the furious Lockyer Valley floods, described by witnesses as an “inland tsunami” and another nine are still missing.

Mining and farming centre Queensland contributes 19 per cent to national output, and its extensive swamping meant “enormous” damage for the economy, especially the key coal export industry.

“Queensland produces around 80 per cent of coking (steelmaking) coal in Australia,” said Mr Swan. “Coking coal itself contributes around 10 per cent to Australia's exports, and coking coal exports contribute around 2 per cent to GDP.”

Crops and tourism had also taken a hit, said Mr Swan, while the record inundation of Brisbane, Australia's third-largest city, had shaken the retail and manufacturing sectors.

Mr Swan said 3.1 million people had been hit by the floods nationwide and disaster relief payments had already topped Aus$227 million ($224 million), with a “massive” task ahead rebuilding roads, railways and bridges.—AFP