A Senate committee has paved the way for the Turnbull government to withhold childcare rebates from the families of unvaccinated children, despite health experts' concerns it will not improve vaccination rates.
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It also recommended introducing a national scheme to compensate families of children who have had an adverse reaction to vaccination.
Under a proposed 'no jab, no pay' law, children who are not vaccinated would not be eligible for a range of childcare subsidies from next January. This would remove current exemptions for conscientious and religious objectors.
The law was introduced into Parliament in September to try to encourage a growing number of conscientious objectors to vaccinate their children.
The proportion of children registered as conscientious objectors has grown from 0.2 per cent in 1999 (4271 children) to 1.8 per cent or 39,523 children last year, according to the Department of Health.
The Senate standing committee on community affairs, chaired by senator Zed Seselja, recommended on Wednesday the bill be passed. Labor and the Greens are understood to support the bill.
The committee said that any "infringements" the bill imposes on parents' right to make decisions about their children's health and to access early child care "are necessary and fairly outweighed by the rights of all members of the community to health and that vaccination is a critical and important health measure".
Immunisation expert University of Sydney Associate Professor Julie Leask had warned that the bill would not help immunisation rates because it did not address practical barriers for those who did not oppose vaccination, while unfairly targeting low-income families.
The committee also recommended that the government consider education strategies on immunisation for parents hesitant to vaccinate their children.
The bill should be reviewed after a year, it said, and again after three years to assess its impact, including on disadvantaged families.
The committee also supported the Royal Australian College of Physicians' suggestion for a national vaccine compensation scheme for the small group of people severely adversely affected by vaccinations. "It said it encourages the government to examine the merits of such a scheme".
The college said that "since immunisation benefits the population as well as the individual, it is entirely just and reasonable that society as a whole accepts vaccine damage compensation for affected individuals and their families".
The World Health Organisation estimates 19 countries already have compensation schemes in place, including New Zealand, Britain, the US and Canada.
Greens leader Richard Di Natale separately recommended that bill be delayed two years, to take effect on January 1, 2018, to allow immunisation data systems to be improved. He also said the government should implement strategies to overcome practical barriers to vaccination, for example home visiting programs, in this time.