Abbott government will spend $3.5bn over four years on the package, which takes effect in July 2017, after the next election

This article is more than 5 years old

This article is more than 5 years old

The Abbott government is promising bigger childcare handouts to all working parents from 2017, regardless of their income, in a budget centrepiece designed to resurrect its standing in the electorate.



Losers will be families who have been receiving benefits without working, and the 700,000 single-income and single-parent families losing family tax benefit payments under last year’s stalled budget cuts, which are slated to pay for the new childcare package.

An unspecified number of new parents will receive reduced parental leave as the government moves to save $1bn over four years by ending “double-dipping” into both a privately provided scheme and the existing government funded payments.

The new childcare package is framed around the argument that families should receive payments only as an incentive to enter the workforce, but opens the government to criticism for offering even the wealthiest families $10,000 a year for each child for their childcare.

“Our objective is to help parents who want to work or work more,” Tony Abbott said. The government had calculated that 240,000 families could increase the hours they worked because of the changes, the prime minister added.

The package will hit resistance in the Senate with Labor insisting it will not back the cuts to family tax benefits that the government says are the only way to pay for the new childcare plan.

“Any package which assists with cost of living and workforce participation making it easier for parents to participate in the workforce is welcome, and we’ll have a look at that, but for the government to link this to cuts to family payments is disingenuous and cruel,” the shadow treasurer, Chris Bowen, told the ABC’s Insiders program.

Greens senator Sarah Hanson-Young said the tactic of linking the childcare payments to the family tax benefit cuts amounted to “blackmail” and low-income families needed childcare to look for a job.

“If they really want mums to be able to ease themselves back into the workforce they’ve got to be given those guaranteed childcare support places upfront,” she said.

“How do you go to a job interview if you’ve got nowhere to put your child while you’re there?”

The government will spend $3.5bn over the next four years on the childcare package – which takes effect in July 2017, after the next election – in addition to the about $7bn a year already budgeted for childcare spending. The new system will:

• offer more generous payments of 85% of the cost of care to all families earning up to $65,000;

• remove the $7,500 a year each child cap on payments to all families earning up to $185,000 a year;

• continue to offer the 50% rebate to families earning over $185,000 and increase the annual cap for each child for these families to $10,000.

But to save money it will also:

• remove all childcare subsidies for families earning more than $65,000 where both parents are not in the workforce, replacing them with a sliding scale of payments to encourage parents to increase their hours of casual or part-time work;

• reduce the number of hours of subsidised childcare offered to non-working families earning under $65,000 to 12 hours a week, but continue to subsidise those hours recognising that children from these families may have particular need of the pre-school education that childcare provides;

• Stop parents from “double-dipping” by accessing both government- and employer-funded paid parental leave.

And the entire package depends upon the Senate passing the cuts to family tax benefits proposed in last year’s budget but rejected by the Senate. They included:

• ending family tax benefit B (paid to single-income families) when the youngest child turns six, saving $1.9bn over five years;

• freezing all family tax payments for two years, saving $2.6bn over four years;

• cutting end-of-year family tax benefit supplements, saving $1.2bn over four years.

The new childcare package was announced in News Corp newspapers on Sunday morning, but appearing on Channel Nine some hours later, the treasurer, Joe Hockey, was unwilling to confirm the details.

“I will leave that to the prime minister and the minister responsible today,” he said.

The government has also pre-announced a new pensions assets test removing the part pension from wealthier retirees, to replace the now-ditched idea of changing indexation arrangements to reduce the value of all pensions over time.

But it has ruled out any changes to the extremely generous tax concessions which see the wealthiest 10% of households claim 40% of the $30bn a year in tax breaks on super.

It is now presenting itself as the party of “no new taxes” and claiming Labor’s plan to modestly rein in the tax breaks amounts to “taking a sledgehammer” to Australians’ retirement savings.

Both Labor and the Greens have promised to consider the new pensions plan, which is far less regressive than last year’s budget measure to reduce over time the value of all pensions.

And although they have promised to consider the new child care package, Labor’s families spokeswoman, Jenny Macklin, said she would scrutinise the changes hitting families looking for work.

“Well, for example those families who have very part-time work, families with split shifts, families who are working irregular shifts who really need to hold on to a childcare place because they don’t know when their employer will be calling them in,” she said.

“So those sorts of families really need to know they’ll have an affordable childcare place. We know that for very many vulnerable children they need access to childcare, and we want it to be affordable and high quality. They’re the sorts of tests that we’ll have when we look at the detail of these proposals.”