Childcare: Parents of children under six will receive a childcare supplement worth €1,000 a year - or €19 a week - from the middle of next year.
The supplement is part of a five-year childcare strategy announced in the Budget, which will provide for an extension of maternity leave, grant-aid for childcare providers and the creation of up to 50,000 extra childcare places.
The new childcare supplement will be payable to all parents for each child under six regardless of their employment status.
The payments, for about 350,000 children, will be exempt from income tax and will be paid on a quarterly basis from the middle of next year.
The supplement, which will cost €353 million a year, will be in addition to the existing child benefit, which is payable to all children.
Child benefit increased by between €7 and €8 to €150 a month for the first and second child, and to €185 for third and subsequent children.
"By any standards, this is a significant contribution from the taxpayer towards the cost of childcare in such circumstances," Mr Cowen said.
The Minister also announced a series of measures to ease pressure on parents during the first year of a child's development.
From next March, mothers of newborn babies will be entitled to an extra four weeks paid maternity leave, bringing the total to 22 weeks paid leave in 2006.
An additional four weeks of paid leave will be available in 2007, by which time mothers will be entitled to 26 weeks, or six months, of paid maternity leave.
An additional four weeks of unpaid leave in 2006 and another four weeks unpaid in 2007 will also be available.
These measures, Mr Cowen said, would mean that by 2007 parents would be able to take a total of 56 weeks paid and unpaid leave.
In total, €317 million has been provided for childcare measures to be introduced next year.
The cost of the programme will rise to more than €600 million by 2008.
A number of measures to increase the supply of childcare places were also announced. These involve a combination of capital grant aid and tax exemptions for childminders in the informal childcare sector.
Under a five-year investment programme, which will involve funds from the EU-supported equal opportunities childcare programme, up to 65,000 extra childcare places will be created.
To help improve the supply of places, people in the so-called informal childminding sector who look after up to three children will be exempt from income tax and PRSI on income up to €10,000 a year.
These people will be required to notify their local county childcare committee, to allow for greater co-ordination of the availability of childcare places.
Capital grant aid for private childcare providers will double to €100,000, while community providers will continue to receive grant aid worth up to €20,000 a place.
The provision of new places will be complemented by a stepping up of training arrangements to ensure the provision of quality childcare, Mr Cowen said. It is expected that 17,000 childcare workers will be trained in the period.
The Minister said the measures were aimed at helping parents in the early years of child rearing by widening the options they have, whether in the formal or informal sector.
He cautioned that only a limited amount could be achieved in a short period of time, but significant changes would be made in the years ahead.
"We can only do so much in one Budget. A complete solution will take time but the structured medium-term approach I am announcing will, I believe, increase the options for parents in a balanced way.
"I hope it will be recognised as a constructive step forward in this area."
He also said that as well as the early childcare supplement, it was important to take account of increases in child benefit in previous years.
He said the cost of child benefit was €2 billion, compared to €500 million five years ago.
Together with the new childcare supplement, the measures would bring the amount a family with two children under six will receive next year to €2,800, or more than €50 a week in direct financial support.
