Last week the Prime Minister announced that next Tuesday’s Budget would see changes to the government’s proposed reforms to Paid Parental Leave (PPL). This announcement came in the wake of speculation that the Budget will include sweeping cuts to family payments, and amid threats from within the Coalition that some government senators might cross the floor over a future PPL bill if the cap on the payment were not reduced.
Under current policy, only primary carers with incomes under $150,000 are eligible to receive PPL payments. The payment is equal to the full-time minimum wage and can be paid for 18 weeks ($11,198). Until last week, the Coalition’s scheme was set to provide primary carers with their pre-birth replacement wage for 26 weeks capped at incomes of $150,000.
The proposal was projected to increase government expenditure on PPL from $1.4 billion to $4.1 billion in 2015-16.
By reducing the income cap on eligibility the PM has reduced the maximum payment that can be made under the proposal from $75,000 to $50,000.
The reduction in the cap may appear to better align the policy with the government’s rhetoric that there is a ‘budget emergency’ that requires swift and decisive action. In truth it is a largely symbolic gesture. In the words of one government senator: ‘Even to reduce it from $150,000 to $100,000 is not a big saving in the actual cost of the program…‘.
The Commission of Audit (CoA) has recommended a further reduction in the cap to Average Weekly Earnings (AWE), currently $57,460, citing this ‘…a more appropriate cap for the level of wage replacement’ but this too would represent a large increase in expenditure on PPL from current levels.
A reading of the Australian Taxation Office’s Taxation Statistics 2011-12 suggests that moving the cap from $150,000 to $100,000 is unlikely to have much of an impact on the overall cost of the proposed scheme. Only 1.4% of women aged 18 to 39 had annual taxable incomes in excess of $150,000 in 2011-12. Within this age group 4.7% of women had annual taxable incomes above $100,000.
The CoA’s recommendation of reducing the cap to AWE would have a more material impact on the projected PPL outlays of the scheme. In May 2012 AWE was just under $55,000. The Tax Stats indicate that 29.2% of women aged 18 to 39 had annual taxable incomes in excess of $55,000. However, with AWE currently 1.8 times the full-time minimum wage, even this recommendation would involve an extremely large increase in expenditure on PPL making the task of Budget repair more difficult.
Matthew Taylor is a research fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > PPL back-down: Symbolism not Budget repair
PPL back-down: Symbolism not Budget repair
Under current policy, only primary carers with incomes under $150,000 are eligible to receive PPL payments. The payment is equal to the full-time minimum wage and can be paid for 18 weeks ($11,198). Until last week, the Coalition’s scheme was set to provide primary carers with their pre-birth replacement wage for 26 weeks capped at incomes of $150,000.
The proposal was projected to increase government expenditure on PPL from $1.4 billion to $4.1 billion in 2015-16.
By reducing the income cap on eligibility the PM has reduced the maximum payment that can be made under the proposal from $75,000 to $50,000.
The reduction in the cap may appear to better align the policy with the government’s rhetoric that there is a ‘budget emergency’ that requires swift and decisive action. In truth it is a largely symbolic gesture. In the words of one government senator: ‘Even to reduce it from $150,000 to $100,000 is not a big saving in the actual cost of the program…‘.
The Commission of Audit (CoA) has recommended a further reduction in the cap to Average Weekly Earnings (AWE), currently $57,460, citing this ‘…a more appropriate cap for the level of wage replacement’ but this too would represent a large increase in expenditure on PPL from current levels.
A reading of the Australian Taxation Office’s Taxation Statistics 2011-12 suggests that moving the cap from $150,000 to $100,000 is unlikely to have much of an impact on the overall cost of the proposed scheme. Only 1.4% of women aged 18 to 39 had annual taxable incomes in excess of $150,000 in 2011-12. Within this age group 4.7% of women had annual taxable incomes above $100,000.
The CoA’s recommendation of reducing the cap to AWE would have a more material impact on the projected PPL outlays of the scheme. In May 2012 AWE was just under $55,000. The Tax Stats indicate that 29.2% of women aged 18 to 39 had annual taxable incomes in excess of $55,000. However, with AWE currently 1.8 times the full-time minimum wage, even this recommendation would involve an extremely large increase in expenditure on PPL making the task of Budget repair more difficult.
Matthew Taylor is a research fellow at The Centre for Independent Studies.
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