Speech to the Committee for Economic Development of Australia
*** Check Against Delivery ***
Thank you for the opportunity to speak to you today.
It’s great to be back in Melbourne after Budget week in Canberra.
Budgets are never easy. But in these very difficult and challenging economic times this Budget has involved some very tough decisions.
There were no easy choices as we put together a Budget in the middle of a global recession that’s wiped away $210 billion in revenue.
We don’t have a magic wand but what we’ve delivered is a comprehensive nation building plan for recovery from the biggest global recession since the Great Depression.
In my portfolio, there have been landmark changes in social policy.
Significant reforms to the pension system to make it sustainable as our population ages while giving older Australians, people with disability, carers and veterans more security and certainty.
Reforms to family support which target those who need it most while ensuring its sustainability and encouraging participation and productivity.
It’s been a big week.
Being here, I’m reminded of a previous address I gave to CEDA.
It was early in 2002.
It was International Women’s Day.
It seems like a lifetime ago.
I announced that Labor in Government would introduce a paid maternity leave scheme.
It ended up taking seven long years but this week we finally got there.
So there’s a certain symmetry being back here on International Day of Families to talk about this major victory for Australian families.
On Tuesday night, in his Budget speech, the Treasurer committed the Government to funding a national paid parental leave scheme.
It is essential and long overdue reform.
I remember summoning up the courage nearly 30 years ago to tell my then boss that I was pregnant.
He looked surprised, thought for a moment and then asked, “Does this mean you’ll need to have a week off work?”
A bit in jest in my case – but no laughing matter for so many other women.
To me, paid parental leave is a very simple proposition.
It’s about what’s in the best interests of little babies.
If we want to give our children the best possible start in life we know the early months and years are absolutely vital for social, cognitive and physical development.
For many women the decision to go back early to work is a financial necessity.
Many would rather be home during those important formative weeks and months, establishing the relationship and routines which will shape the development of their child.
As you can probably tell, I have been beating this drum for many years.
But it was only when the government changed and we asked the Productivity Commission to inquire into support for newborn infants that a paid parental leave scheme in Australia became a real possibility.
The Commission found that while access to paid parental leave has grown over the years, it is highly uneven.
Less than one quarter of women on very low wages currently have access to paid parental leave compared with three quarters on high wages.
Only 32 per cent of women who work part-time currently have access; and coverage for public sector workers is nearly double that of private sector workers.
Paid parental leave is more available in some industries than in others. The industries with the lowest levels of access are award-reliant, female dominated, low skilled and highly casualised.
As one young mother explained to the Commission, “As a casual I was not entitled to maternity leave. I had to return to work when my baby was eight weeks old to hold my position. Having to return to work made life more difficult and affected my relationship with my baby.”
Another woman who returned to work four weeks after the birth of each her three children for financial reasons said,”I opted to work nights and weekends when my partner would be at home. It was extremely difficult to juggle caring for small babies and working but I had no choice. It also meant my partner and I were like ships passing in the night for many years.”
It was obvious too, that comprehensive access to paid parental leave for all working women was unlikely without action by the Australian Government.
And so we have acted.
And it’s mostly women in low paid jobs who will benefit.
Today I can reveal details of the distributional modelling that informed our decision making.
It shows that the benefits of a paid parental leave scheme vary according to a range of factors including family income and the split of income between parents.
What the modelling tells us is that generally, families with an income of less than $40,000 a year before the birth of their baby stand to gain more than higher income families.
And the majority of families who will benefit are middle income families.
This is a scheme which supports families on low and middle incomes – the families who need it most.
Following Tuesday night’s Budget, Australia will finally catch up with the rest of the world on paid parental leave.
In fact, until now Australia and the United States were the only two OECD member nations without a comprehensive paid parental leave scheme.
And while we have the ninth highest rate of employment of mothers with children older than six, Australia has a much lower rate or participation than other developed countries when it comes to mothers of younger children.
Australia’s new scheme is closely based on the recommendations of the Productivity Commission.
And I would like to acknowledge the thoughtful contribution made by CEDA to the Commission.
CEDA argued the case for a user-pays, HECS-style income contingent loan made by government to parents.
However after weighing up the benefits and disadvantages of all the options and balancing the interests of employers and their employees the Productivity Commission recommended a government-funded scheme which meets four key objectives.
Wide coverage, modest financial benefits for working mothers, minimal impact on employers and importantly a scheme framed in the reality of these tough economic times.
Our scheme will provide 18 weeks’ paid leave at the the adult federal minimum wage, currently $543.78 per week, to the primary carer of a child born or adopted after that date.
It will be paid to women who’ve worked an average of one day a week in 10 of the 13 months before the birth of their child and income tested at $150,000 on the income of the primary carer.
And recognising that today’s dads want a hands on role in raising their children, we are giving parents more options to balance work and family.
The parental leave payments can be shared between parents. So if mum stays home for say 14 weeks and then returns to work dad can take over and use the remaining four weeks maintaining continuity of parental care.
It’s estimated that by topping up with other leave arrangements, most babies will be able to be cared for exclusively by their parents for the first six months of their lives.
In line with the Productivity Commission’s recommendation, employers will act as paymasters so that women remain on the payroll while they’re on leave to maintain workplace connection.
Mindful of imposing minimum cost to employers – the Government will make advance payments before each payday so employees can be paid in each regular pay cycle.
Superannuation payments will not be initially introduced and along with paternity leave will be considered in a review within three years of the scheme’s introduction.
The Government will soon begin talking to business and employers to make the implementation of the scheme on 1 January 2011 as simple and straightforward as possible.
Despite difficult economic times, Tuesday night’s Budget demonstrated the Government’s determination to make the long-term structural reform that will help put the Budget on a sustainable path despite the substantial demographic challenges we face.
Like our reforms to Australia’s pension system, paid parental leave is an important element in the Government’s strategy to prepare Australia for the challenges of the future.
Higher life expectancy and the ageing baby boomers mean the cohort of Australians over the age of 65 is growing.
By 2047, it’s projected that a quarter of the population will be over the age of 65.
The bottom line is this: for every person over 65 today there are five workers.
By 2047 this will have shrunk to around two and a half workers for each person 65 and older.
Key to meeting these challenges is keeping more women in the workforce.
We know that existing incentives and the impacts of childbearing combine to impact significantly on female labour market participation.
Women accommodate their family responsibilities by working reduced hours or prolonged absences.
Reduced participation through tenuous workplace connection has both a collective and individual downside.
Lower wages, inadequate accumulated superannuation and restricted career development – to name a few of the negatives for working mothers.
Which is why it is so important to support women in those very busy, very demanding years when they are having children.
We must also acknowledge that other modern reality – that most Australian families need two incomes to raise their children and pay the bills.
So many of the young women wanting to have children who told their stories to the Commission wondered how they would manage financially.
One wrote, “I hope to have a baby in the next few years, but if I am unable to get paid maternity leave I don’t know how I will cope, I may have to delay having a child until I am more financially secure, but by that time I will probably no longer be fertile.”
Of course, full-time mums who are not in paid work need support too. We know that all mums ‘work’ whether they have a paid job or not.
The Baby Bonus and Family Tax Benefits will still be available for families who are not eligible for paid parental leave.
A stay at home mum with a partner on average earnings will continue to receive around $10,000 in Government assistance in the year after the birth of their first baby and around $12,000 after the birth of a second child.
Parents who are eligible for paid parental leave or the Baby Bonus and other family assistance will be able to choose between taking these payments or paid parental leave depending on which is of greater financial benefit to them.
Of course many private sector employers have already had the foresight to support their women employees through paid parental leave as an incentive to retain them in the workforce.
They understand that improving retention rates of their workers, who they’ve invested time and money in, makes great business sense.
When Westpac doubled its paid parental leave to 12 weeks with the aim of lifting its return to work rate to 90 per cent, its rationale was that “the business cost of attrition and rehiring far outweighs the cost of maternity benefits.”
After introducing paid parental leave, the NRMA increased its parental leave return from 32 to 85 per cent over five years while AMP’s rate of return to work rose from 50 per cent to 90 per cent in the same timeframe.
Only last week BHP Billiton announced it would provide its 17,000 strong Australian workforce with a minimum of 18 weeks paid parental leave on full-time wages to “give the company a strong, competitive edge.”
And with the capacity of the Government-funded leave to be used in addition to or in conjunction with existing schemes there’s the potential for employers to enhance their own arrangements for their employees.
The chief executive of the Australian Chamber of Commerce, Peter Anderson says companies are unlikely to wind back their own schemes because they want to be “leaders in this area and because there is a business case for those companies to do more than what the general economy is doing.”
And supermarket chain, Aldi has guaranteed it won’t be watering down its 14 weeks at half pay scheme saying, “our employees are our greatest asset and additional cash boost from the Government on what we already offer will be a great help to new parents.”
The campaign for comprehensive paid parental leave has been waged for decades.
The drum roll for change has been sounded by many.
By unions, business, industry groups, community leaders and, most recently, by the hundreds of women and men, young and old who shared their stories with the Productivity Commission.
Those who campaigned with the abiding conviction that new babies need time with their mothers.
Like the woman who told the Commission that although she had no children her support for paid parental leave was entirely selfish.
Because, she said, when she’s old and frail she wants those who care for her to have been raised in a positive family environment.
And she doesn’t want to live in a society where women must choose between having a job or having a baby.
Two of the many good reasons why this Government, even in these tough economic times, is delivering reform that’s in the best interests of families and long-term economic security.