Treasurer Peter Costello changed some of the rhetoric last night, stating the government wanted to help families “balance work and parenthood” (Labor and the unions say “family” which, of course, also includes not just children but other family members such as elderly parents or siblings needing care) but the strategy embedded in this new language hardly shifted from the old policy of keeping women’s employment choices limited via the punitive effective marginal tax rates (EMTR) that are the effect of the interaction of the tax and family payment systems.
Sure, tax rates are slightly reduced but there was no table showing that the EMTR disincentive impact had changed. Maybe it hadn’t. There is a lot of smoke and mirrors in this part of the budget, with families being given what is in effect a massive pre-election bribe by bringing forward and paying in cash child care rebate payments already owed to families from previous budgets that were supposed to be tax rebates but are now converted to cash payments of more than $8000 per kid.
Makes the baby bonus look positively parsimonious, but parents would not want to get used to it. It’s a one-off election special. The increase to the Child Care Rebate, the basic government contribution to child care costs (a great deal of which goes straight into Eddie Groves’ ABC Learning’s coffers), is 13 per cent (inflation plus 10 per cent) but at $134.80 per week falls way short of the $200 a day paid by so many mums in Sydney and Melbourne.
There was nothing for parents who use nannies, despite the recommendations of Bronwyn Bishop’s House of Reps Family and Human Services Committee’s Balancing Work and Family report late last year, and the forward estimates for child care could stand some expert scrutiny since the table below (included in the Department of Family, Community Services and Indigenous Affairs Budget at a Glance document) seems to indicate that funding for the Child Care benefit will decrease over the next three years.
Child Care Benefit – increased rates
If that is the intention, the Treasurer neglected to mention it in his speech last night.
The Government will provide $728.5 million over five years to increase the rate of Child Care Benefit. As this reduces the out of pocket payment for families there will be a reduction in the Government’s total Child Care Tax Rebate Payments of $180.0 million.
Part of helping families to balance work and parenthood is to assist with child care. Government assistance for child care in 2007‑08 will be $3 billion, nearly three times the level in 1996‑97.
From 1 July 2007, the rates of Child Care Benefit will increase by 10 per cent, on top of indexation. This will increase the maximum rate of Child Care Benefit from $2.96 to $3.37 per hour, meaning that a family on maximum rate assistance with one child in Long Day Care for 40 hours per week will be eligible for $134.80 per week. This change will provide $728 million in extra assistance to more than 700,000 families.
The Government will also reimburse 30 per cent of the remaining out‑of‑pocket expenses after the payment of the Benefit. From 1 July 2007, families will receive the 30 per cent Child Care Tax Rebate as a direct payment shortly after the financial year in which they incur out‑of‑pocket child care costs. Families who incur out‑of‑pocket child care costs in both 2005‑06 and 2006‑07 will receive two rebates in 2007‑08 — one through the tax system under existing arrangements, and the other as a direct payment. The maximum payment will be $4,096 per child in respect of 2005‑06 and $4,211 per child for 2006‑07.
This reform will help mothers who want to take part in the paid workforce to do so.