A taxpayer-funded parental leave scheme would benefit around 140,000 mothers and their newborn children each year and yield community-wide gains in the long term, according to a draft report released by the Productivity Commission today.

The scheme proposes 18 weeks leave at the adult minimum wage ($544 per week) for eligible mothers and two weeks paid leave to over 225,000 similarly entitled fathers.

Speaking on the release of the draft report — Paid Parental Leave —Commissioner Robert Fitzgerald said: “Our proposal is designed to deliver three main goals: better child and maternal welfare; greater workforce participation by women; and improved work-family balance and gender equity.

“The proposed measures give immediate support to parents of newborn children in the paid workforce, but ultimately benefit all Australians”.

Commissioner Angela MacRae said ‘We want to enable mothers to stay at home for at least the first six months of their baby’s life, since this is the most critical time for the nurturing of a newborn child. Given that parents usually are able to take off some months on their own account, 18 weeks additional paid leave will allow six months at home for almost all parents – particularly low-wage mothers.’

Under the proposed scheme, mothers who are not eligible for paid parental leave, would receive a new maternity allowance (which will replace the baby bonus) and other social security benefits.

The Commission’s scheme is designed to integrate with existing workplace practices – it requires ‘genuine attachment’ to work as an eligibility requirement and a capped superannuation contribution from employers for most employees.

According to the Commission, in most cases initial payment of the leave benefit would be by the employer, with early reimbursement by government.

The scheme covers full time, part time and casual employees, as well as the self-employed and contractors.

The Commission’s proposed scheme will cost the government budget around an additional $450 million annually — after offsets from taxing the benefits and reduced social transfers, including removing eligibility for the baby bonus for those who take paid parental leave.

Business will put in a net $74 million a year through superannuation contributions, whilst benefiting from greater retention rates of women employees.

The Commission is now seeking responses to its draft findings, including through public hearings before submitting its final report to the Australian Government in late February 2009.