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Money for nothin’ and parental leave for free

By Jessica Brown - posted Monday, 29 September 2008


Paid parental leave for a year sounds like a great idea - hey, why not make it two? Lots of time to bond with the new bundle of joy, with money from the government coming in to keep up the mortgage repayments. It sounds like a dream come true - money for nothin’ and parental leave for free.

It’s a wonderful idea unless, of course, you are one of the suckers who doesn’t actually take parental leave: the childless, the already-had-kids or the stay-at-home mum (or dad). You know, the ones whose taxes are helping pay off all those blissful new parents’ mortgages?

In the ongoing debate about paid maternity leave, the same old cliché is often wheeled out - Australia is one of only two wealthy countries in the world without it. This is true, but it also manages to miss the point entirely. Australian mums and dads aren’t suffering under a miserly government - we already spend well over the OECD average on families. In terms of cash payments to parents, we’re second only to Luxembourg.

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That is why the push from groups such as Unions NSW and political advocacy forum GetUp! for publicly funded leave of 6-12 months is so hard to justify. In terms of financial support from the government, Australian parents aren’t exactly doing it tough.

This doesn’t mean that paid maternity leave in itself is a bad idea. Introducing it means that all women can spend at least the first few weeks of their baby’s life as a full time mum, and it is fair that as a society we chip in for the cost of the next generation. The Baby Bonus can be transformed into 14 weeks of maternity leave without too much extra cost for taxpayers.

But there will still be demands for funding beyond this, because some parents (understandably) want a longer period away from work to care for their baby.

A fairer solution would be to help these parents’ pay for longer periods of parental leave themselves. Its called income smoothing: making sure that money you have had in the past, or will have in the future, is available when you really need it - such as when you’re on parental leave.

For most Australians, the concept isn’t new - we already do it with HECS, mortgages, superannuation and insurance. Why not for parental leave too?

The Federal Government recently introduced the First Home Saver Account, which provides tax breaks for young people to save for a deposit. “Parental Leave Saver Accounts” could have similar incentives, with tax breaks either targeted at the lowest income groups, or given equally to everyone. Couples could share their savings, or roll any unused savings into their mortgage or super if they decide not to have children.

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Parental Leave Saver Accounts could be complemented by government backed loans, such as the type proposed by the Centre for the Economic Development of Australia. A HECS-style scheme means that parents don’t need to start making repayments until their income rises, so even low income people who would have trouble repaying a bank loan can afford it.

Tax breaks mean there is an incentive for parents to save, but if the money runs out there’s the option of a loan.

Sure, these options still represent some cost to taxpayers but they are also a good compromise. It’s a positive thing to allow mums and dads to stay home with their new babies, but it’s not really fair to ask the next door neighbour to pay for it. While it would be nice to get your money for nothin’, some things are never free.

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Jessica Brown's paper "Baby Steps: Toward Self-funded Parental Leave" (PDF 131KB) was released on September 18, 2008. First published in Crickey on September 23, 2008.



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About the Author

Jessica Brown is a Policy Analyst at the Centre for Independent Studies.

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All articles by Jessica Brown

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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