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HECS-style loan flagged as an alternative to paid parental leave scheme

Compromise: The Centre for Independent Studies will propose that parents "self-finance" parental leave.

Compromise: The Centre for Independent Studies will propose that parents "self-finance" parental leave. Photo: Peter Braig

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''.

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185 comments

  • what we have now is working so why change it.
    or is it if it was labor party policy lets get rid of it even though we agreed with it when we were in opposition this abbot government is even worse than the Gillard greens so many stuff ups by a man who not capable of being our PM

    Commenter
    max
    Location
    Qld
    Date and time
    July 07, 2014, 6:37AM
    • not working at all.

      One parent needs to look after kids not some 17yo on minimum wage who's more interesting in where she's going out drinking tonight.

      A paid employee will never be 1/2 as good as kids parent.

      Commenter
      NOT SURE
      Date and time
      July 07, 2014, 9:07AM
    • Its not working. There's 1 solution - get rid of all of it. Simple. You want kids you pay for it, it worked for generations

      Commenter
      rayj
      Date and time
      July 07, 2014, 9:32AM
    • @ NOT SURE Could it possibly be that the child's parents were also out drinking at 17 years of age instead of saving their money so in the future one of them could take sometime off and raise a child without having to get the rest of us to pay for it?

      Commenter
      JW
      Date and time
      July 07, 2014, 9:38AM
    • Then pay the kids parents.

      Commenter
      Rachael
      Location
      Sydney
      Date and time
      July 07, 2014, 9:40AM
    • Rachael,
      Being a parent isn't a job, its a life choice. Why would we pay them for a personal decision?

      Commenter
      Freddie Frog
      Date and time
      July 07, 2014, 10:00AM
    • JW, that's a really bad generalisation of an entire generation and one that is fast outlasting it's welcome. It's something typical of the Baby Boomers though to assume that all of Gen X and Gen Y have it so easy when in reality your generation has literally screwed it for everyone else.

      Commenter
      MamaJune
      Date and time
      July 07, 2014, 10:01AM
    • Not sure
      Not sure what your post is about.
      Paid parental leave is about PARENTS looking ate their kids whether they are 17 or 37.

      Commenter
      Steve
      Date and time
      July 07, 2014, 10:02AM
    • @rayj - no, it didn't. In generations past, people paid for children by having more children to earn income (this is why people in developing countries tend to have a lot of children -they are an economic asset that the parents need to survive). Do you want 10 year olds out working, or have we progressed beyond this point?

      Children are an investment, because its the children people have that will build your roads, staff your hospitals and pay taxes to cover your pension entitlements when you age. Your contribution to the next generation by supporting people who have children is a quid pro quo for those children's eventual support of you.

      Its called living in a society. If you don't like it, move into the bush and look after yourself.

      And yes, this applies equally to people who do have children. Very few people's children will contribute enough to society to pay back what their aged parents take out.

      Commenter
      This old chestnut
      Date and time
      July 07, 2014, 10:03AM
    • Of course this is the fairest way to do it. Parents need to understand if they want children, then THEY have to support them, not the taxpayer.

      If this was introduced, you can bet your bottom dollar, all those advocating this leave (for the baby's sake) wouldn't take it if they knew they would have to pay it back!

      Commenter
      peter
      Date and time
      July 07, 2014, 10:35AM

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