The Morrison government looks set to unveil a multibillion-dollar funding injection into child care amid widespread pressure for the next budget to address women’s economic security and workforce participation.
The changes could cost the budget $5 billion, but would create more than $11 billion in economic activity by enabling more mothers and fathers to work more hours, according to Grattan Institute research being considered by the government.
Business groups have backed a funding boost, with the Business Council of Australia publishing a $2.5 billion funding plan on Monday.
But the Australian Council of Trade Unions (ACTU) has called on the government to spend $7 billion to create a universal free childcare program after axing a temporary cost-free program launched during lockdowns last year.
Unions call for greater ambition
ACTU president Michele O’Neil will deliver a press club speech on Tuesday urging the government to unveil more ambitious reforms to tackle gender inequities as part of the COVID-19 recovery.
“For a tantalising moment, we made child care free and working families had a glimpse of a better life without the crippling cost of child care,” Ms O’Neil will say.
Universal free child care is needed to lift female workforce participation to the same rate as men’s, a shift that could unlock $70 billion in extra economic activity, according to ACTU estimates.
“Many of us are wondering whether we have witnessed a genuinely transformative moment for women over the past few months or whether once the headlines die down, so will any commitment to real change,” Ms O’Neill will say, according to an advance copy of her speech.
“The 2021 budget will give us this answer.”
The government already spends more than $9 billion a year on childcare subsidies.
These cover 85 per cent of childcare costs for families earning up to $69,390 a year, but fall by 1 percentage point for every $3000 in extra household income.
The government also imposes an annual cap that prevents families with annual income above $189,390 from taking more than $10,560.
Universal child care ‘massively important’
Grattan has said a lift in childcare funding could be a “stepping stone” towards a universal system based on a 95 per cent subsidy rate.
The think tank’s chief executive, Danielle Wood, said a universal policy could cost about $12 billion a year, translating to a 27 per cent increase in working hours for women and a $27 billion boost to GDP – though she stressed these figures are difficult to model accurately.
“I certainly can see the advantages in moving in that direction [of universal child care] … as a society, we should be willing to pay for that,” Ms Wood told The New Daily.
“My hesitation is that in a budget-constrained world … where else would you be cutting spending to pay for it?
“I would like to have a conversation about how we, as a society, could pay for … a massive and important social and economic change.”
More than 61 per cent of Australian women participate in the labour force (and over 70 per cent of men), but women are much more likely to work part-time, with more than a third working less than 30 hours a week – the fourth-highest rate in the OECD.
Funding reforms alone aren’t enough: Grattan
Grattan’s proposals contain more than just funding adjustments.
They also recommend market reforms, which Ms Wood said would be vital in ensuring any extra funding delivered value for taxpayer money.
“The risk always in these hybrid markets, where you have private-sector operators being funded largely through governments, is that subsidies are clawed back somewhere in the chain,” she said.
These reforms include funding regular quality assessments of childcare centres; requiring providers to publish data about their waiting lists; and monitoring child care availability in partnership with state governments.
Grattan also suggested asking the ACCC to undertake a market study to identify whether competition issues were making fees more expensive.
“It would be useful for governments, who are putting a lot of money into this system, to understand who’s making money and where,” Ms Wood said.
“Having the competition regulator sniffing around may make some businesses think twice about trying to profiteer from the subsidy increase.”
Child care reforms to address skills gaps: BCA
The BCA has also emerged as an enthusiastic supporter of childcare reforms as a way to address skills shortages brought on by the COVID-19 pandemic.
The BCA released a proposal on Monday that would increase the maximum subsidy to 95 per cent, extend the tapering threshold to $80,000, and lower the funding taper rate to 1 percentage point for every $4000 in extra family income.
CEO Jennifer Westacott said increasing the participation of highly skilled women in the workforce was a priority, because international border closures were driving skills shortages.
“For every dollar we invest in child care, we’ll get $2 back,” Ms Westacott said in a statement on Monday.
“KPMG estimates that the cost of our child care plan would be around $2.5 billion, but it would deliver a boost to the economy of around $4 to $5 billion.”
Modelling published on Monday by BIS Economics found migrant workers have a 92 per cent employment participation rate, much higher than the overall 66 per cent rate for the working age population.