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The generosity of Abbott's paid parental leave scheme puts the budget in jeopardy Generosity of Abbott's paid parental leave scheme puts budget in jeopardy
(about 3 hours later)
Some of the proposals leaking out of theSome of the proposals leaking out of the
budget process indicate the gap between political rhetoric and policy remainsbudget process indicate the gap between political rhetoric and policy remains
large. For all the talk of a government of "no surprises" and the need to endlarge. For all the talk of a government of "no surprises" and the need to end
the age of entitlement, the government appears to be considering athe age of entitlement, the government appears to be considering a
surprise increase in income tax while continuing to fight for its unpopularsurprise increase in income tax while continuing to fight for its unpopular
gold plated paid parental leave scheme while introducing agold plated paid parental leave scheme while introducing a
new income threshold of $100,000 for government payments.new income threshold of $100,000 for government payments.
Restricting family benefits to those with aRestricting family benefits to those with a
combined income under $100,000 is a good idea. At $20.3bn a year, thecombined income under $100,000 is a good idea. At $20.3bn a year, the
family tax benefits program represents the third largest single area of federalfamily tax benefits program represents the third largest single area of federal
government spending. As it currently stands, a couple familygovernment spending. As it currently stands, a couple family
with two children aged 14 and 10 with a combined taxable income of $100,000 per yearwith two children aged 14 and 10 with a combined taxable income of $100,000 per year
receives $2,377 a year in tax-free family payments. If that income is earnedreceives $2,377 a year in tax-free family payments. If that income is earned
primarily by one person, that amount becomes $3,127 as a result, which is designed to cater to the single-breadwinner family.primarily by one person, that amount becomes $3,127 as a result, which is designed to cater to the single-breadwinner family.
It’sIt’s
clear that there is room for cuts, but abolishing family tax benefit part B, or rolling part A and part B into one payment with a uniform withdrawal rate, as the Henry Review recommended, would be a better way of targeting assistance. It could also reduce low income traps for secondary earners if done correctly.clear that there is room for cuts, but abolishing family tax benefit part B, or rolling part A and part B into one payment with a uniform withdrawal rate, as the Henry Review recommended, would be a better way of targeting assistance. It could also reduce low income traps for secondary earners if done correctly.
However, the case for reform in this areaHowever, the case for reform in this area
is substantially weakened by the prime minister’s steely resolve, in the faceis substantially weakened by the prime minister’s steely resolve, in the face
of broad-based objections, to offer a massive new paid parental leaveof broad-based objections, to offer a massive new paid parental leave
entitlement (PPL) to 26 weeks of replacement wages.entitlement (PPL) to 26 weeks of replacement wages.
The PPL scheme has a $75,000 cap, but it’sThe PPL scheme has a $75,000 cap, but it’s
only a cap on the amount someone can receive – people earning above $150,000only a cap on the amount someone can receive – people earning above $150,000
are still eligible for the scheme. This is excessively generous, and itsare still eligible for the scheme. This is excessively generous, and its
generosity is only compounded by the fact that eligibility is assessed ongenerosity is only compounded by the fact that eligibility is assessed on
individual income instead of combined income. The proposal to restrict familyindividual income instead of combined income. The proposal to restrict family
benefits would see an even starker and more untenable difference emerge betweenbenefits would see an even starker and more untenable difference emerge between
family benefits and the proposed PPL scheme.family benefits and the proposed PPL scheme.
It's true that believing in promises made at an election isIt's true that believing in promises made at an election is
rather like believing in the tooth fairy. Nevertheless, it’s disappointing that "no changes to pensions" is an election promise worth keeping, but "no newrather like believing in the tooth fairy. Nevertheless, it’s disappointing that "no changes to pensions" is an election promise worth keeping, but "no new
taxes" is not. The proposed deficit levy, temporary or not, would simply be antaxes" is not. The proposed deficit levy, temporary or not, would simply be an
acknowledgement that the government lacks the will to address the causes of theacknowledgement that the government lacks the will to address the causes of the
growing deficit.growing deficit.
Cutting assistance to comfortably well-offCutting assistance to comfortably well-off
(if not necessarily wealthy) families is justifiable on the grounds of trimming(if not necessarily wealthy) families is justifiable on the grounds of trimming
fiscal fat and reducing entitlements – but to impose a new tax on these samefiscal fat and reducing entitlements – but to impose a new tax on these same
families while simultaneously allowing them to access an incredibly generousfamilies while simultaneously allowing them to access an incredibly generous
paid parental leave scheme is contradictory.paid parental leave scheme is contradictory.
Somewhere in this morass of rhetoric andSomewhere in this morass of rhetoric and
policy proposals is this truth: if people are going to have to make do withpolicy proposals is this truth: if people are going to have to make do with
receiving less from the government, then governments are also going to have toreceiving less from the government, then governments are also going to have to
make do with taking less from the taxpayer.make do with taking less from the taxpayer.
This is especially so when the proposal inThis is especially so when the proposal in
question rests on unsteady philosophical foundations. Taking a broader view ofquestion rests on unsteady philosophical foundations. Taking a broader view of
the deficit levy suggests the policy is not really about the deficit – it’sthe deficit levy suggests the policy is not really about the deficit – it’s
about raising extra money so the government can preserve its absurd commitment toabout raising extra money so the government can preserve its absurd commitment to
the paid parental leave scheme and its ruling out of changes to pensions inthe paid parental leave scheme and its ruling out of changes to pensions in
their current term.their current term.
The May budget will set the tone for thisThe May budget will set the tone for this
government’s term in office because it will be an example of how they intend togovernment’s term in office because it will be an example of how they intend to
fix the budget crisis they were elected to solve. Bad policy like the PPL scheme and the deficit levy undermines both the efficacy and thefix the budget crisis they were elected to solve. Bad policy like the PPL scheme and the deficit levy undermines both the efficacy and the
public case for good policy such as changes to family benefits. It’s importantpublic case for good policy such as changes to family benefits. It’s important
that the government gets it right the first time.that the government gets it right the first time.