Ideas@TheCentre
Paid Maternity Leave and the Global Financial Crisis
Paid maternity leave was a high profile election promise of the Rudd government, but with an impending recession, the big question now is ‘can we can afford it?’
Support for Australian families is already at historically high levels. Almost $20 billion of taxpayers’ money goes towards payments such as Family Tax Benefit, Childcare Benefit and the Baby Bonus each year.
In 1980 about 1% of GDP was spent on families, but by 2003 this figure had risen to about 3.5%. Australia spends more on families, measured in GDP per capita, than any other developed country. About half of all Australian families with children effectively pay no tax once family benefits are taken into account: most (or all) of it is ‘churned’ back to them in the form of cash payments.
Faced with these figures, and a large and looming deficit, the introduction of paid maternity leave seems very hard to justify. Even after absorbing the Baby Bonus, a new maternity leave scheme will burn a half billion dollar hole in taxpayers’ pockets.
Advocates of paid maternity leave argue that while our family payments system is very generous, it favours stay-at-home mums over working mums and provides a disincentive for women to go back to work after giving birth. Providing a payment specifically for working mothers will address this imbalance.
This is the predicament that the government is faced with. Rudd’s election promise was made when many assumed the economy would keep growing in perpetuity. In the face of a contracting economy, it now seems like reckless spending.
The answer must lie in reform of the existing family payments system. Rather than more spending, what’s needed is better spending. If the government wants to introduce paid maternity leave—or any other family policy— it should do so as part of a broader restructuring which redistributes current family policy spending equitably among families, rather than simply increasing spending.
In doing this, the government could pursue its policy objectives without blowing out the family payments bill.
Jessica Brown is a Policy Analyst in the Social Foundations program at CIS.
