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New Analysis: Optimising the Child Care Subsidy is good for children, families and the economy.

I am pleased to share our latest resource aimed at improving wellbeing for children and their families by optimising the child care subsidy (CCS).

Read our fact sheet

In our suburbs and regions, our cities and remote communities, Australian families with young children are feeling the brunt of our first recession in almost three decades.

They might not be in the news every day, but these are the Australians feeling the economic pressure, the financial insecurity that suffocates communities and panics parents.

These are families who have mortgages or rents to cover and bills to pay, who have lost hours or their jobs entirely.

They are all around us.

These are the real young family stories behind last week’s National Accounts figures – a set of numbers which are so unfamiliar to many currently living through the experience, thanks to almost 30 years of uninterrupted economic growth.

But for those of us with a few more years behind us, this does stir the memory of the recessions of the 80s and 90s, and the short-term, long-term and devastating impact that they can have, particularly on vulnerable families.

We remember the ashen faces of our parents or partners, middle-aged family members coming home after losing their jobs.

We remember the dread that comes with losing the dignity of work and the pressure and uncertainty that comes with losing a steady wage.

And we know that this is the beginning not the end. For many of these workers, they did not find full-time employment until many years later and some never re-entered the workforce again.

As we now stare down the barrel of an even deeper recession, a new generation of families face a similar fate, and those of us who remember what that’s like and the consequences that can come, need to act now to give them a hand.

It is these families who also hold the key to the nation’s economic and social recovery. The lock in this analogy, is barriers to their workplace participation.

The elegant solution here is found though the current Child Care Subsidy system, and not, I might add, by blowing the current framework up, but rather by building on the good work of the system in a measured and evidenced-based way.

New analysis from KPMG provides a solid justification for such an approach.

The model proposes that we lift the subsidy to 95 per cent for households earning up to $80,000, with the taper decreasing by 1 per cent for every additional $4,000 of family income, until a floor of 30 per cent subsidy.

And what it shows is that if we were to adopt this, we can address affordability for families, at the same time as creating up to 210,000 additional working days per week, as well as adding $5.4 billion to the economy.

This is not free child care – this is an optimisation of the current system, and a recognition of what needs to be done now to get families back to work and the economy back on track.

As the analysis demonstrates, many families do not benefit from working additional hours, particularly when one parent moves from part-time to full-time work, due to structural disincentives arising from the loss in Child Care Subsidy, alongside the combined impact of paying income tax, the loss of family payments, and extra out-of-pocket childcare expenses.

Under the current policy settings, parents could end up with 30 per cent or less of what they earn that day in their pocket if they want to take on an extra day of work.

Yes of course there are medium and long-term benefits in the return to the workforce, but the current system has short-term disincentives to the return to work and full-time work, precisely when we need to remove them.

Under our proposed measured approach, we will see more families with more money in their pocket, and more time to invest in their careers and the economy. No one will be worse off, in fact, under this approach everyone single Australian family will be better off.

All families relying on the Child Care Subsidy will receive the cost of living relief they so desperately need – taking the pressure off and allowing them to get back to work and to increase their hours.

Australian businesses will benefit from the availability of greater workforce utilisation.
And the broader economy will receive the boost it desperately needs at the time it needs it.

This is all possible by building on top of the current solid framework. It will also strengthen our system, so we can be ready for future reforms when there are less demands on the Federal Budget.

By optimising the Child Care Subsidy in this way, families throughout our suburbs and in our regions will have access to more affordable and high-quality early childhood education.

This is good for families, good for children and good for the country.

Kind Regards,
Jane Hunt

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