The baby bonus is a public expenditure sink with no economic rationale (as I have written previously). It appears that Professors Ross Guest and Bob Gregory, reported in The Australian, agree with me.
Baby bonus payments already drain $1.16 billion per year and will get another $250 million bump next year when the bonus climbs to $5,000.
At its best, the baby bonus was just a vote buying exercise and a failed one at that. At its worst, it is an attempt to increase the population; something that is misplaced because there is a cheaper alternative — immigration. Moreover, even if fertility were an appropriate rationale, given that the same amount is paid regardless of whether the baby is a first, second, third or beyond child, it is hardly a stimulus to that.
As Bob Gregory told The Australian, “if it was put in place to get more children, then it’s unbelievably expensive. Every new mother gets it, but you might only get a few extra babies that wouldn’t have been born regardless.” Finally, as it is paid for all babies, it is not the sort of thing designed to target and help low income households.
The previous Coalition government put in the baby bonus but it is now the current government’s responsibility. Thus far, it appears not to be moving on the payment. I must admit that I can’t for the life of me imagine a Labor government slashing public sector jobs while at the same time keeping and increasing the baby bonus.
Leave aside the obvious disruption that is going to occur in maternity hospitals in the last week of June and first week of July, the increment to the baby bonus is unjustified. My hope is that, at the very least, it will be frozen in the May budget.
Of course, just eliminating the baby bonus may create distortions to birth timing and so it would need to be done with care. I suggest the following:
(i) the government cancels the rise in the baby bonus for 1st July, 2008 and instead lowers it back from $4,187 to $4,000. That will save around $250m per year.
(ii) the government moves the bonus as a tax rebate rather than a straight out payment.
(iii) then the government puts a gradient on the baby bonus based on income level reducing it to $3,000 for the highest income earners (on the same basis as other child-based payouts) with a straight line based on income back to $4,000 for those paying no tax;
(iv) then, from 1st July, 2009, it starts reducing the income threshold.
Or, at least something like this. My point is that we can eliminate the baby bonus without too much, if any, political cost.
Joshua Gans is an economics professor at the Melbourne Business School. He blogs on these issues at economics.com.au.
Joshua Gans is right. Cancel the baby bonus. If you can’t afford to have children, then don’t have them. I’d rather my taxes went to increasing pensions for senior citizens so they can at least live with dignity.
Oh John James! You crazy fellow. Yet another unnecessary segue into abortion. Well done.
I believe the way Joshua Gans has proposed to slowly let off the baby bonus bit by bit is a great idea. We simply need more immigration, and have some sort of scheme to allow our expatriates to return home, at least temporarily, seeing as we obviously must not give experts from foreign countries any opportunites at life here at all, for the good of their respective nations, and not because of xenophobia. No, not at all.
Friend with new babe reports Maternity nurse visit conversation. “This is the first house this week that i have visited, which does not have a new Plasma TV box at the back door.”
I am expecting a baby in May and, given the mediocre paid maternity leave provisions, the baby bonus will be a more than welcome money bundle this year. How about asking expectant women what they think? All the writers mentioned above are econ-men!!
I believe that the baby bonus would be far more beneficial if it were targeted in the form of services to mothers & babies (for example, home visits by baby health nurses for the first few months of life). This might prevent soaring child abuse statistics