Prime Minister Tony Abbott's paid parental leave scheme looks unlikely to pass the Senate in its current form, but a prominent free market think tank has come up with a compromise: give parents a HECS-style loan to fund the 26 weeks of parental leave instead.
In a report released on Monday, the Centre for Independent Studies will call for what it argues is a fairer and less expensive paid parental leave policy.
The CIS wants parents to have the option of a loan equal to the pre-baby wages of the primary carer, up to the Coalition's income cap of $100,000 a year, for 26 weeks.
All but $5000 of the loan would need to be repaid once parents were working again and meeting the minimum wage.
This would allow them to ''self-finance'' parental leave, according to report author Matthew Taylor.
Mr Taylor estimates that a high-income family - with two university educated parents - would take four years to repay the loan for one child and five years for a two-child family. The repayments would not be more than 6 per cent of family earnings.
A low-income family - where both parents have not finished year 12 - would take six years to pay off the loan for one child and eight years for two, with repayments not exceeding 4 per cent of family earnings.
Mr Taylor said the Coalition's policy, where the primary caregiver would be given their full replacement salary plus superannuation - paid for by a levy on big business - was poorly targeted and inequitable. ''Rather than targeting expenditure at parents who would not otherwise be able to take parental leave, current PPL policy makes payments to employed parents on annual incomes of up to $100,000,'' he said.
He said an alternative policy was needed that ''aligns the cost of PPL with those that benefit from it''.
Mr Taylor also argued that a paid parental leave loan would improve gender equality as repaying the loan would be the responsibility of both parents regardless of their relationship's status.
Mr Abbott is struggling to find the numbers to pass his ''signature'' paid parental leave policy in the Senate, with opponents right across Parliament, including within the Coalition. The present scheme - introduced by Labor in 2011 - provides the minimum wage of 18 weeks without superannuation.
Mr Taylor said his HECS-style scheme, costed at $657 million a year, would be significantly cheaper than either Labor or the Coalition's schemes.
Labor's scheme is set to cost $1.9 billion in 2014-15 and Mr Abbott’s is estimated to cost more than $5 billion annually.
When asked if he would consider the CIS policy, a spokeswoman for Mr Abbott said the government was ''working purposefully and courteously with incoming senators to do good things for our country . . . Our scheme is fundamentally a matter of justice for the women of our country''.