Government Pushes For Budget Savings And Affordable Childcare

The Federal Government has introduced its revised Budget Savings Bill, which cuts welfare payments whilst boosting childcare subsidies.

Having been unable to pass into law a package of legislation first championed under former Prime Minister Tony Abbott, the Government has introduced the Social Services Legislation Amendment (Omnibus and Child Care Reform) Bill 2017 on Wednesday with several key changes.

Childcare rejig

The Coalition now plans to scrap the $7,500 cap on the Child Care Rebate for families earning under $185,000 per year, increase Paid Parental Leave from 18 weeks to 20 weeks, and increase fortnightly payments under the Family Tax Benefit (FTB) Part A by $20 per child.

According to Education Minister Simon Birmingham, abolishing the $7,500 cap will see up to 90,000 families have their fees subsidised for the entire year. Another 40,000 families above the income threshold will have their cap increased to $10,000 per year.

They anticipate that the increase in parental leave would result in an extra 2 weeks’ leave for nearly 100,000 families.

They will also combine the existing childcare benefit and childcare rebate into a single means-tested subsidy. According to the Coalition government, a family earning $60,000 a year would only spend around $15 on childcare per day under this measure. The rate of the subsidy would be between 50%-85% of the childcare costs, depending on family income.

Working mothers whose employers provide paid parental leave will also receive government paid parental leave up to a combined total of 20 weeks, ensuring the state effectively complements any shortfall in time from a company’s parental leave plan.

On the flipside, the proposed changes include gradually abolishing Family Tax Benefit end-of-year supplements by July 1 2018. The FTB Part A supplement pays up to $726.35 for each child per year, while the Part B supplement pays up to an extra $354.05 per child per year.

Fund more affordable childcare with budget cuts?

The childcare reforms are part of the government’s Budget Savings (Omnibus) Bill, which encompasses a range of welfare cuts projected to save $5.5 billion over the current Budget estimates.

Here’s a summary of some of the key spending and saving initiatives of this bill:

Boosts

  • Removal of $7,500 annual limit to Child Care Rebate.
  • Increase fortnightly payments to recipients of Family Tax Benefit Part A (FTB-A) by an extra $20 per child per fortnight up to age 19 years old.
  • Government-provided paid parental leave increased from 18 weeks to 20 weeks.

Cuts and knocks

  • Phase out Family Tax Benefit end-of-year supplements by July 1 2018.
  • Phase out Family Tax Benefit part B for single parents under 60 years old when youngest child turns 17 years old (instead of age 13, as previously planned).
  • Abolish Energy Supplement (worth up to $14/fortnight) for new welfare recipients from 20 September 2017.
  • Increase age of eligibility for unemployment benefits from 22 to 25 years old.
  • Reduce Age Pension to recipients who are overseas for longer than 6 weeks (instead of 26 weeks). See more info on this.
  • Stop payment of pension supplement to recipients temporarily overseas for longer than 6 weeks.
  • Under-25s to have a 4-week waiting period before receiving income support.
  • Stop Pensioner Education Supplement.
  • Stop Education Entry Payment.
  • One week waiting period for Parenting Payment and Youth Allowance.

The Opposition highlighted the cuts to the FTB, which would reportedly leave more than 1 million Australian families worse off overall, some by up to $3,000 per year.

According to the ALP figures, Australians between 22 and 24 years old would then only be eligible for the lower Youth Allowance, resulting in a cut of $48 per week – just under $2,500 per year.

The Energy Supplement will also be abolished, impacting pensioners and other low-income earning Australians.

Several more of the proposed changes continue to be argued against by the Federal Opposition. Chief among them are the proposed changes to Newstart payments, which would see the minimum eligibility age raised to 25 years old and force young jobseekers to wait 5 weeks before receiving welfare payments.

ACOSS: ‘Increase does not make up for cuts’

The Australian Council of Social Service (ACOSS) urged parliament not to pass the bill, saying that the changes would reduce the social security budget by $7 billion and leave many low-income families worse off.

“The increase to the Family Tax Benefit Part A for families with children by $10 a week does not make up for cuts to the supplements,” stated ACOSS CEO Dr Cassandra Goldie.

“A sole parent with two children aged 13 and 16 will still lose between $14 and $20 per week, or around $1,000 a year.

“Abolishing the energy supplement will cut between $4-$7 a week from people on the lowest incomes, including pensioners, students, families, and people locked out of paid work.”

The net reduction in spending from the new legislation will result in several billion dollars being added to the budget bottom line. Heated debate still continues, however, as to whether the loss of welfare payments and subsidies makes the savings worth it.

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