Rebates and bonuses

By Legal Eagle

I note that there has been a contretemps between the Federal Government and ABC Learning over ABC Learning’s decision to raise childcare fees, although it insists this is not a respose to the Federal Budget’s decision to increase childcare rebate fees. ABC Learning is not alone; in a strange coincidence, the childcare centre to which I send my daughter has also decided to raise its fees. I suspect that many other childcare centres have (purely by coincidence, of course) decided to raise their fees.

I also note that obstetrician’s fees seem to have increased quite a bit in the two and a half years since I had my daughter, and funnily enough, so has the Baby Bonus…

And those First Home Buyer’s Grants? I think housing prices rose in part because of the grants – people knew that they could ask a first home buyer to pay just that little bit more.

I’m starting to have suspicions – are these rebates, bonuses and grants the right way in which to tackle the problems that they are designed to address? As soon as they are granted, the cost of the relevant service or thing seems to rise to incorporate the grant. Thus the benefit to the individual is minimal: the cost just swallows the grant, and I end up paying exactly the same as I always did. As far as I can see, it’s just the law of the market – you know that you can get the consumer to pay the same amount he or she has always paid, and the rebate or whatever will cover the rise.

So I really do wonder about the wisdom of such rebates and bonuses from the government’s point of view. I’m profoundly glad to have access to them, because it means that I can cover the increased price rises – but I do wonder if there would be a price rise at all if there wasn’t a bonus or rebate. And I suspect they will make little difference to me in terms of the net amount I have to pay.

I’m no economist (far from it): just thinkin’ is all…


  1. MikeM
    Posted June 24, 2008 at 10:22 am | Permalink

    Grants like those are a really stupid way to help people. The right way to help is to do something to increase supply. Unfortunately, funding more childcare centres in areas of short supply does not have the same immediate consumer impact as dangling cash.

    Furthermore, Joshua Gans has pointed out that the way the baby bonus was introduced had further undesirable effects, 1st July, 2004, had the most number of births on any day in Australian history.

  2. V J Creagh
    Posted June 24, 2008 at 10:33 am | Permalink

    My first look at your blog. I am puzzled by the title – Skepticlawyer. Are you American?

    Even if so, the word is spelled sceptic in Australia, and you semm to be talking to an Australian audience. I like a lot about the Yanks who after all saved our bacon in WWII, but we don’t need their mongrelised spelling.

  3. Posted June 24, 2008 at 12:54 pm | Permalink

    “Would I have done that? I don’t think so – nothing is more important than my health and the health of my child. It is not worth risking complications for a couple of thou.”

    Risking what complications? There is no evidence at all that any medically necessary or urgent interventions were “delayed”, nor is there any evidence that there were any adverse health outcomes.

    If you had scheduled a C section at 38-39 weeks for twins or a breech presentation or just because you felt like it, you didn’t have much cash, and you could get another grand(ish) for scheduling it at 39-40 weeks instead – what adverse health outcomes do you think you’re risking?

  4. Posted June 24, 2008 at 2:37 pm | Permalink

    “Presumably there has to be some reason why the doctor tells you to have a C-section at 38 weeks rather than 40?”

    No, there isn’t. Only recently has the long and hard fight to get “routine” C sections pushed back from 38 weeks to 39 weeks been successful. Since babies are normally born anywhere between 38 and 42 weeks, this is still as much as 3 weeks “early” for some babies (or a little more, since dating cannot be any more accurate than plus or minus 5 days). The average length of an uninterfered-with first pregnancy is, as far as we can tell, around 41 weeks (not 40).

    The only advantage to early elective C section is to the hospital’s and doctor’s scheduling: when they do the C section before labour begins, they can schedule a list a C sections bam, bam, bam. It’s efficient, for them. That shouldn’t be confused with “medical necessity”.

    On the other side, iatrogenic prematurity is a medical issue that raised its ugly head when the “nothing good happens after 38 weeks” crowd held sway. Difficulties establishing breastfeeding are common in near-term babies who haven’t reached their true full term. And there is some evidence that waiting until the onset of labour before doing a planned C section has other benefits for the baby (these are yet to be fully explored).

    You might also like to do some research about the supposed benefits of routine C section at 38 weeks in pregnancy diabetes, if the diabetes is moderately well-controlled.

    Being risk averse is not a great reason to buy into unnecessary and unnecessarily early birth interventions – interventions themselves carry significant and substantial risks. I’ve blogged about them a fair bit in the past, if you’re interested. But people tend to assess risks in non-rational ways when it comes to birthing; iatrogenic complications are typically seen as unavoidable “oh well, we did everything we could” issues, even when the intervention wasn’t truly indicated and another course may have been safer.

  5. Jacques Chester
    Posted June 24, 2008 at 2:47 pm | Permalink

    As soon as they are granted, the cost of the relevant service or thing seems to rise to incorporate the grant.

    Subsidies to consumers raise prices. They always have and they always will.

    The key to the problem is the nature of the grants, which take the form of middle-class welfare. A far cheaper and simpler option is to cut income taxes.

    The problem is that with an income tax, it is quickly forgotten and you don’t get to re-announce it every six months. No cheques arrive to remind voters of who their bestest mates are. No letters from the Minister. And so on, and so forth. Politically, tax cuts are factored in by the electorate almost instantly.

    It’s terrible policy to introduce grants and rebates for consumer services. Politicians know this, and if they don’t, their advisors are frantically telling them so. It’s just opportunistic deception, pure and simple.

  6. Posted June 24, 2008 at 4:53 pm | Permalink

    I was going to comment that this is classic ‘market distorting’ behaviour – all you do is send the price up, but Jacques has already done it for me.

    VJ: I use ‘skeptic’ because that’s the way it’s spelt by the Australian Skeptics, an organisation of which I’m a member. It’s meant to signal ‘skeptic member’ who is also a lawyer. Put it down to thinking up a blog moniker 4 years ago in about 2 seconds!

  7. Posted June 24, 2008 at 5:29 pm | Permalink

    I have had various female friends say that being pregnant makes them stupid. Is this true? Or just a myth? Or (as I suspect will be the case) entirely variable, depending on individual hormones? A couple of friends have found it very irritating, though.

  8. Posted June 24, 2008 at 5:33 pm | Permalink

    The only problem I can see then is that you’d be in a really busy hospital and there would be a risk that you’d not get proper care.

    I think that’s really the only useful critique of the baby bonus bust-boom effect. Unfortunately Leigh and Gans mostly ignored it in favour of the headline-grabbing Teh Fat scare.

    Luckily, my daughter was born two days before her due date, naturally. I didn’t even have gas (I tried it, but I starting thinking “people on the roof” were “looking at me”, so they took it away again). Hopefully No. 2 will be the same as No. 1, just much quicker! I was lucky to have a really experienced private midwife with me for No. 1, but I can’t afford it again (even with the baby bonus).

    Yikes, on the gas reaction! That doesn’t sound like fun at all. Gas/epidural/drug reactions are one of the reasons I’m keen on antenatal courses and birthing units providing really comprehensive education on pain relief in labour, including a good toolbox of non-pharmaceutical relief – everything from one-on-one support to massage to TENS to guidance in positioning to waterbirth to leaving the woman the hell alone if she wants to be. There are still plenty of hospitals and doctors who “won’t allow” at least several of these options.

    In my experience, some women are not at all prepared for an epidural not working or half working, for example, and it’s a terrifying situation to find yourself t in when you were relying 100% on being numbed as your coping strategy. (Not that you were in this situation, I’m springboarding off here.)

    I hope number 2 is a great birth for you. Maybe you could afford a doula, or do you have some informed/supportive friend who could provide backup support? Good midwives are worth their weight in gold, aren’t they?

  9. Posted June 26, 2008 at 2:40 am | Permalink

    Obs fees have gone up as a direct result of Abbott’s ill conceived capping of patient payouts. Private Obs moved their fees to pre hospital to include all pre, peri and post birthing fees and thereby triggered the cap so that patients payed less and medicare payed more.

2 Trackbacks

  1. By Club Troppo » Missing Link Daily on July 22, 2008 at 7:37 am

    […] Eagle has her doubts about the efficcy of the childcare rebate (and services tax rebates and bonuses generally).Andrew Bartlett and Kim say Viva Open […]

  2. By skepticlawyer » Paid maternity leave on June 1, 2010 at 8:17 am

    […] When kids are small, the carer-parent usually doesn’t want to work so long, but once the kids start going to school, the carer-parent may want the opportunity to increase his or her hours. So then I was wondering if we could offer a smörgåsbord of choices, so that carer-parents (usually women, but not always) were able to go back to work if they wanted to do so. Perhaps some kind of childcare rebate (although I’m still doubtful about rebates…) […]

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