Fast Lane: Why a HECS-style loan for paid parental leave will never work

Prime Minister Tony Abbott’s paid parental leave scheme is looking like it will get short shrift in the Senate in its current form.

The latest alternative proposal comes from think tank the Centre for Independent Studies, which advocates parents taking out a HECS-style loan to fund 26 weeks of paid parental leave.

In its proposal published this morning, the CIS calls for 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.

Currently, Australia spends just under $1.4 billion on statutory paid parental leave to provide more than 130,000 parents with up to 18 weeks of parental leave paid at the full-time minimum wage.

Under Abbott’s scheme, which proposes paying primary carers at their pre-birth wages up to a cap of $100,000 for up to 26 weeks, the CIS claims the government’s outlays on statutory paid parental leave would increase by over $3 billion by 2016–17.

Report author Matthew Taylor claims Abbott’s scheme is unfair and too expensive.

“A paid parental leave loans scheme would align the costs of paid parental leave payments with those who benefit from them,” he says. 

That’s where Taylor’s reasoning falls apart. 

It’s not just the parents who receive paid parental leave payments who benefit from the scheme.

The whole of society benefits from having more children.

The whole of society will also benefit from increasing women’s workforce participation, a critical issue given our ageing population.

Small business is set to be a real winner if Abbott’s scheme actually gets through.  It will help small business attract and retain employees who are parents who may otherwise have opted for jobs in larger businesses with generous paid parental leave schemes.

What’s more, small business won’t have to directly pay for the scheme as under Abbott’s proposal it will be funded through a levy on big business.

More debt in the form of a HECS-style loan is the last thing struggling parents and small business needs.