The plasma myth: how parents of newborns spend their money

Image: Wikimedia Commons

The Australian Government has announced that it intends to reduce the amount of Baby Bonus payable in respect of second or subsequent children from 1 July 2013. This is expected to result in savings of around $170 million per year ($504.9 million over the forward estimates).

According to the Government, this change recognises that costs associated with second or subsequent newborns are not as great as those associated with the first.

This post takes a look at what is known about the impact of newborns on household budgets, focusing in particular on any significant changes in spending on second or subsequent children.

Notably, the available evidence suggests that there is no significant increase in expenditure on electronic goods by families with newborns. This challenges the widespread view that couples spend their Baby Bonus on adult-focused consumer goods such as plasma televisions.

Sibling rivalry: Baby Bonus and Paid Parental Leave

Image Source: wikimedia images

The Government has announced as part of the Mid Year Economic and Fiscal Outlook (MYEFO) that it will reduce the Baby Bonus to $5000 and freeze indexation of the payment for three years. Currently, the Baby Bonus is $5437 and indexed in line with changes to the Consumer Price Index (CPI) on 1 July each year.

The decision has been criticised by some as discriminating against 'stay at home' mothers because the Government did not also take savings from the Paid Parental Leave scheme. This post attempts to clarify the issues involved by briefly looking at the relationship between Baby Bonus and Paid Parental Leave.