The Costs of Children: Budget Standards Estimates and the Child Support Scheme

In 1998, the Department of Social Security released a report on the development of indicative budget standards for Australia, by a group of researchers at the Social Policy Research Centre. This paper explains the methodology used in the research, including a discussion of the strengths and limitations of the budget standards approach, and illustrates these by presenting estimates of the costs of children. A budget standard identifies the goods and services required to attain a given standard of living, and then prices them to arrive at the budget that corresponds to the standard. The research derives budgets for a broad range of Australian households at two separate standards: ‘modest but adequate’ and ‘low cost’. The modest but adequate standard broadly corresponds to what is needed in contemporary Australia to allow full participation in Australian society, falling between the standards of decency and survival on the one hand and luxury on the other. The low cost standard is one which still allows a degree of social and economic participation consistent with community standards, but may require frugal and careful management of resources. Budgets have been developed at the two standards for a total of 46 different household types. One advantage of the budget standards approach is that it allows estimates to be derived of the costs for additional household members, by comparing the estimates for different household types at the same standard of living. The paper explains how this is achieved in practice and illustrates the method by analysing the estimates of the costs of children produced from the research and comparing these estimates with the level of child support payments.