Does the Intergenerational Report under-state future family costs?

At the time of the second intergenerational report, I lamented the rapid increase in family payments. Fortunately the third intergenerational report shows that these have since stabilised.

Indeed, annual per person family payments (Family Tax Benefit, childcare, Baby Bonus/parental leave) are at $980 a year for 2009-10 only $10 higher than forecast for this financial year in 2007. FTB is slightly down (the means test on FTB B?) but childcare is up by 75%.

Rather optimistically, family payments are forecast to have slightly decreased by the end of this decade to $960 a year. I find this difficult to believe. For a start, there are already active plans to increase FTB handouts via overcompensation for the ETS. While the Coalition may be able to stall this for a while, their overall weak political position means that Senate obstruction has a use-by date.

And though parental leave/Baby Bonus increases are built into the estimates of future spending, these are likely to be very much on the conservative side. The long-term campaign for the state to partly take over the family’s traditional child support role is far from over, and we can expect to see more of the costs of rearing children shifted to the childless.

Like its predecessors, this intergenerational report promotes the need for spending control but is remarkably quiet on family payments, even though FTB is the third most expensive social policy item in the budget after the aged pension and schools. This is odd, because of all the social policy payments this is the most obviously discretionary. Much of it goes to families that are not poor and have no special needs.

4 thoughts on “Does the Intergenerational Report under-state future family costs?

  1. “The long-term campaign for the state to partly take over the family’s traditional child support role…”. While causes like paid maternity leave could be described as campaigns, I’m not so sure about FTB. That just seems – unfortunately – like median voter politics. Whatever happens, I take some comfort in the knowledge that even the welfare state cannot force the childless to change nappies.

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  2. Andrew, these things are always conducted under “current policy” assumptions. That there may be future political pressures pushing figures up or down is not counted – it’s assumed current legislation holds unaltered until 2040. To do otherwise would make the figures even easier to rig – ” of course this government is going to slash taxes, boost spending on defence/infrastructure/services/whatever and run a budget surplus. We just haven’t legislated for it yet”.

    Mind you the IGR has always been heavily tweaked to make political points for the Treasurer-du-jour, to the point where I think the whole exercise is a waste of taxpayer’s money. The first one, in particular, had some outrageous health projections in it purely to make Mr Costello’s case for cuts to the PBS in that Budget. For the current one, the dodgiest bit is the medium-term fiscal outlook.

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  3. DD – Yes, my point wasn’t to say the the figures were verifiably wrong on Treasury’s own terms, just that I think the assumptions on which it is based will not hold. Given that weakness plus the intrinsic difficulties in this kind of forecasting (as evidenced by some significant revisions even since the 2007 IGR) the actual long-range figures are very dubious and publishing them is of doubtful value.

    That said, I’m not sure that the whole exercise is a waste of time. A population with large numbers of elderly people does have major implications that we need to think about, even if we can’t say now what % of GDP their pensions and healthcare costs will consume in 2040.

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  4. Have to say I disagree. Here in the UK we have a simular system but each and every person is entitled to have children and take advantage of the scheme.

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