Palmer gives Abbott a way out on parental leave

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ScreenHunter_2810 Jun. 10 08.35

By Leith van Onselen

For months, Tony Abbott’s $5.5 billion a year Paid Parental Leave (PPL) Scheme has been condemned from every corner.

Back in March, The AFR reported that former Treasury Secretary, Ken Henry, had cautioned against the Scheme, questioning whether it was appropriate as the Federal Budget comes under increasing pressure as the nation’s population ages.

And shortly afterwards, The AFR reported that former Treasurer, Peter Costello, had advised Hockey not to support the PPL Scheme, claiming that it was “excessively expensive at a time when the government was looking for structural savings”. In 2010, Costello also described PPL as “silly”, noting that it would reduce the competitiveness of Australian business, whilst contravening the Liberal Party philosophy of low taxes. In a similar vein, former Howard Government minister, Peter Reith, described PPL as “one of the ‘bad decisions’ Mr Abbott made in the cause of defeating Labor”, whereas the Commission of Audit criticised the Scheme in its initial report to Government.

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Members within the Abbott Government have also become increasing vocal against the PPL Scheme.

In April, The AFR reported that “a group of Liberal senators, including Cory Bernardi, Ian Macdonald and Dean Smith, have told colleagues they either harbour deep reservations or have resolved not to support the scheme when it comes before Parliament later this year”. They also argued that the Scheme sends a poor message to the electorate given the Government’s war on entitlements and claims of a fiscal emergency, as well as questioned Abbott’s claim that it would boost workforce participation.

And today, The Australian has reported that Liberal and National members have told Prime Minister Abbott that they are prepared to vote against PPL, thus ensuring its defeat in the Senate and ultimate demise:

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The Australian has confirmed that senior ministers have conveyed to the Prime Minister that Nationals senators Ron Boswell, Barry O’Sullivan and John Will­iams would vote against the PPL scheme in the upper house.

It has also been suggested to Mr Abbott that enough Liberals would vote against the scheme to ensure its defeat…

With 39 votes required to pass legislation in the Senate, five ­Coalition senators failing to vote in favour of the scheme would ­ensure its defeat.

While Abbott’s PPL scheme looks dead in the water, the Palmer United Party (PUP) appears to have offered Abbott a way-out, claiming that he may support PPL if it is reduced to 26 weeks at the minimum wage and extended equally to all new mothers, not just those whom are working. From The Brisbane Times:

On Monday, Fairfax Media revealed a compromise proposal put forward by Senator Williams that would see the current Labor scheme – which pays the minimum wage for 18 weeks – extended to 26 weeks…

Mr Palmer confirmed on Monday his four allied senators would vote against the current Abbott plan but said he could support Senator Williams’ plan but added another caveat – the payment should be made equally to all new mothers who had a child.

“It should be 26 weeks and it should be the same benefit paid to all citizens,” he said.

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However, speaking over the weekend in Canada, Abbott confirmed that he is holding firm and is not yet willing to concede on PPL:

“Let’s not forget that this is a policy that we took, not to one election, but to two elections and let’s not forget that this is fundamentally a matter of justice for the women of our country, for the mothers and for the parents of our country”…

“Why should people be paid at their real wage when they go on holidays, when they take long-service leave, when they have sick leave and then be paid effectively a welfare wage when they go on parental leave? It just doesn’t make sense and it is my fundamental conviction that paid parental leave is not a welfare entitlement, it is a workplace entitlement and that’s why I’m sticking with the policy.”

If Abbott had any sense, he would lose the stubbornness, accept PUP’s compromise proposal, and move on. Because as long as his preferred scheme remains in play, it will continue to undermine the Government’s pontifications about the need for “shared sacrifice’ to bring the Budget back to surplus, heighten opposition to reform, and continue damaging the Coalition’s standing in the polls.

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Put simply, Abbott needs to take a leaf from his political master, John Howard, who knew when to execute a dignified reversal.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.