Tuesday, 13 October 2020
In 2004, then Treasurer Peter Costello memorably encouraged Australians to “have one for mum, one for dad, and one for the country.”
Over the weekend, our current Treasurer took a leaf out of Costello’s book – “my message to all Australians is that having a son or daughter is great news for them, and also great for the economy.”
Both Treasurers are pointing to the importance of population in times of economic downturn. In fact there are three P’s that are integral to our economic recovery – population, participation, and productivity.
We need more people, more people working, and more economic productivity as a result.
Unfortunately, the Government has failed to understand the importance of women when it comes to all three P’s. Beyond the Treasurer’s words of encouragement, the Government failed to offer almost anything to support women through this recession.
Women make up 51 per cent of our population, yet in the almost thousand pages and one trillion dollars that made up last week’s Budget, women were almost entirely neglected.
The reality is when families are sitting around deciding whether to have children, or whether the second-wage earner should re-enter the workforce, they are adding up the expected expenses. They are doing the maths on what makes financial sense for their families. And for many parents, one of the greatest expenses is child care.
In 2019, 18 per cent of household budgets in average were taken up by child care fees. A recent survey by the Front Project highlighted the impact child care costs have on family decision making, including socialising, where they live and how much they work. More than half of respondents indicated child care costs impact their weekly grocery budgets.
If child care costs too much, many families make the decision that the second income earner, usually the woman, doesn’t return to work full time.
In addition to cost being a barrier, it is well-documented that the current child care system and its interaction with the tax system disincentivise the second income earner from working a fourth or fifth day in the week.
A recent study from KPMG suggests mothers can face workforce disincentive rates of between 75 and 120 per cent when they undertake an extra day of work. Take one example. A father is working full time as a builder and earning $80,000 a year, and his wife is working part-time as a teacher and earning $40,000 a year. If the wife increased her working days from three to four, her workforce disincentive rate would be 96 per cent.
That is, she would only take home four cents in the dollar for every extra dollar she earnt on the fourth day. As a result, many women want to work more, but instead work part time or not at all.
The numbers back this up – Australia is 12 per cent above the OECD average for female part-time workers, and the average Australian woman with kids of early education age works 2.3 days a week.
These cost barriers and disincentives mean women are an underutilised part of our workforce. Tapping into this workforce is where the economic opportunity lies, and could go a long way to help us recover from the recession. KPMG and Grattan both modelled measures to reduce child care costs, and the resulting boost to our annual GDP from increased workforce participation was $7.5 billion to $10 billion.
All of this and more is why the central pillar of Anthony Albanese’s Budget Reply speech on Thursday was making child care more affordable, and removing those financial disincentives for second income earners to work more. Anthony announced that an Albanese Labor Government will introduce the Working Family Child Care Boost, which will bring immediate relief for families to 97 per cent of all families. Our plan includes removing the Child Care Subsidy cap and raising the subsidy and taper rates, which will eliminate the financial disincentives for women to work more.
This will benefit parents with children right up to 13 years old, as it will also reduce the cost of out of school hours care.
We are also committed to ensuring early education and care is affordable for the long term, so will task the Productivity Commission to review the sector, with the aim to transition to a universal 90 per cent subsidy for all families at the conclusion of the Child Care Boost.
Labor’s child care policy puts the three P’s – population, participation and productivity – at the heart of our economic recovery. It makes it more affordable to balance work and family life, boosts women’s workforce participation, and on the whole ensures the skills women have are fully utilised.
Perhaps next time the Treasurer can adapt Peter Costello’s famous words a little differently – “Make child care more affordable – good for women, good for children, and good for the country”.