Budget 2014: Extension for families lifts NZ nearer to rest of world

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Qualifying Kiwis having babies in Australia still much better off.

National's extended paid parental leave scheme lifts New Zealand almost to the average for developed countries - but qualifying Kiwi parents will still be much better off if they have their babies in Australia.

The 26 for Babies coalition welcomed the Budget decision to extend paid leave from 14 weeks to 18 weeks by 2016 as "a positive development", bringing New Zealand nearly into line with the OECD average of 19 weeks in 2012.

But there will be no change to the maximum pay rate of $488.17 a week, which values mothers at only 82 per cent of the legal minimum wage and is one of the lowest rates in the OECD.

In contrast, this week's Australian Budget confirmed Prime Minister Tony Abbott's promise to extend paid leave there from 18 weeks at the minimum wage at present to 26 weeks on a mother's full previous pay up to A$50,000 in six months - equivalent to A$1923 ($2077) a week.

Council of Trade Unions social policy analyst Eileen Brown said Bill English's Budget delivered the minimum that he could get away with when opinion polls showed 62 per cent support to extend paid leave to 26 weeks.

"They had to do something," she said. "Overall the integrity of the paid parental leave scheme has been kept, but the level is still below the OECD average.

"The campaign to extend it will continue, but they have taken some of the heat out of it."

Mr English has kept his budgeted surplus this year by deferring extension of paid leave. It will increase to 16 weeks next April and to 18 weeks from April 2016.

The eligibility rules will also be widened to include all those who worked at least 10 hours a week for any employer over any 26 of the 52 weeks before their due date.

Until now parents only qualified if they worked at least 10 hours a week for the same employer for six months.

Officials estimate that this change will bring in only an extra 800 recipients a year on top of the 26,000 who already qualify.

Foster parents who formally take on a child under age 6 in a "home for life" contract with Child, Youth and Family will also now qualify for paid parental leave on the same basis as parents who adopt a child under 6. This will add another 600 eligible parents.

The Budget also increases the parental tax credit, which currently pays $150 a week for eight weeks to about 15,000 parents of a new baby who do not qualify for paid parental leave.

This rate has not changed since 1999 but will increase next April to $220 a week for 10 weeks, and this will boost numbers receiving it by about 1200 because it will be worth more to them than paid parental leave.

Child Poverty Action Group economist Susan St John said the changes would still leave nothing for about 15,000 new mothers, based on last year's 58,700 births.

Parents on benefits, student allowances, ACC or Super have never been entitled to either the parental tax credit, since it was introduced in the late 1990s, or to paid leave, which started in 2002.

"It's all part of a philosophy that says work must pay," Dr St John said.

She said the Government could have reduced child poverty more if it had used the $64 million extra a year that will go on parental leave from 2016 to increase tax credits for the poorest families - those on benefits.

Adjustments

• Paid leave for 27,400 parents at $488 a week extended from 14 weeks to 16 weeks next April and 18 weeks in 2016.

• Parental tax credit for 16,200 parents who don't qualify for paid leave raised to $220 a week for 10 weeks.

• About 15,000 parents on benefits, student allowances, ACC or Super will get nothing.