Pre-budget statements by the Prime Minister and other leading politicians aroused hopes that the 2006-07 budget would favour families with children. These expectations were not realised.
On 18 April 2006, the Prime Minister, John Howard delivered an address to the Menzies Research Centre that detailed the government's approaches to family policy. (1) Several of his statements are notable. First, he reiterated the principle of 'horizontal equity'. That is, in recognition of the costs of children and of their social benefit, a family with children should have a lower tax burden than a couple without children (or a single person) on the same income level:
At a time when there is general dismay at our relatively low fertility rate, what possible public policy justification can there be for affording precisely the same tax treatment to a couple without children on $80,000, compared with a couple with two children on the same income? Consistent with the principle of horizontal equity, he went on to reject the characterisation of family benefits as 'middle-class welfare' and said that a taxation system that fails to recognise the costs of raising children is a taxation system 'without a social vision'. He also rejected the characterisation of family benefits as 'churning', the inefficient movements of cash out of one pocket, through the government bureaucracy and back into another pocket. This characterisation of family benefits had been made in January 2006 by the Labor Party's Senator Chris Evans and was given some prominence by the chief political journalist of the Australian Financial Review, Laura Tingle, in the pages of that newspaper. (2) Howard cited Peter Whiteford of the OECD as showing that Australia had the lowest level of 'churn' of any OECD country and that 'many of the supposed solutions to churning favoured by the Government's critics would likely have adverse distributional consequences for low and middle income households'. In other words, family benefits in Australia redistribute income; they do not simply churn it. Finally, echoing the feminists of the 1970s (including the 1970s Coalition Minister for Social Security, Margaret Guilfoyle), Howard said:
One of the distinguishing features of FTB [family tax benefit] is that it is paid to the principal carer--overwhelmingly the mother. If simply rolled into a reformed income tax system, the bulk of individual tax cuts would go to men, financed by the withdrawal of direct...