The government should give parents a spoonful of sugar for their nannies, the Productivity Commission recommends.
Extending government subsidies to qualified nannies and other in-home care would provide the sweetener many parents need to work more hours.
It recommends streamlining government assistance for child care into a single early care and learning subsidy.
The per-child payment would be means- and activity-tested, paid directly to child care providers and cover up to 100 hours a fortnight.
There would be a top-up for children with extra needs.
The commission suggests the government pay 90 per cent of costs for families on less than $60,000 a year and tapering down to 30 per cent for families bringing in more than $300,000.
Families where neither parent works or studies for at least 24 hours a fortnight wouldn’t get any payment.
But families employing nannies – as long as they meet quality standards – could get government subsidies for the first time.
The commission also recommends the government let au pairs on working holiday visas work for 12 months instead of six. Au pairs still wouldn’t attract any government subsidies.
There was broad support for the national quality framework Labor established but it could be tweaked to reduce costs without compromising quality.
If the federal government takes up the commission’s recommendations, the significant changes would affect every child care user and provider.
But the commission says it’s worth it.
Its plans would lead to a drop in the proportion of fees parents pay, increase the number of hours used per week and encourage up to 47,000 more mothers back to work.
The new system would cost the government about $8 billion a year – roughly $1 billion more than child care assistance costs now.
Many of the 1000-plus submissions to the inquiry suggested redirecting some money from Prime Minister Tony Abbott’s planned changes to the paid parental leave scheme.
The commission agrees there may be a case for this, saying it’s unclear whether increasing paid parental leave would bring significant additional benefits.
Opposition early childhood spokeswoman Kate Ellis cautioned that if no extra money was put into the system then any expansion to cover nannies would mean cuts to existing services.
Assistant Minister for Education Sussan Ley said she didn’t want to pre-empt the commission’s final report, due in October.