Goodstart welcomes Grattan report, saying ECEC affordability issues could handbrake economy

Australia’s childcare funding needs reform to make it more affordable for Australian families, Goodstart Early Learning’s Head of Advocacy John Cherry has said, adding that a failure to address affordability issues “could be acting as a handbrake on our economic recovery”.

Mr Cherry’s comments were sparked by a report released recently by the Grattan Institute, which calls for a modest reform to the Child Care Subsidy to increase the maximum and minimum subsidy rates by 10 per cent each (i.e. maximum from 85 per cent to 95 per cent and minimum subsidy from 20 per cent to 30 per cent of fees) and smoothing out the income test taper, which “is currently a sharp cliff”,

Modelling from the institute shows the reform would cost Australia $5 billion, but would add $11 billion to the GDP, as well as reducing disincentives to parents – particularly women – from increasing their workforce participation as the cost of child care for working more days would be reduced.

“Grattan’s headline numbers are quite conservative,” Mr Cherry said, commenting that, in his opinion, they “overstate the cost and understate the benefit.” 

Additional revenue from a larger GDP, he said, would reduce the cost of the reform to $3 billion[1], while the long-term economic gains from more children accessing early learning before school could more than double the economic gains.

“A similar model in Quebec ended up paying for itself because the economic benefits to low income working mothers were so high,” he added. 

Mr Cherry went on to highlight the issues of female workforce participation, which he said was a “major problem” before COVID-19, and that the pandemic had rendered it “a massive burning platform now”.

The Child Care Subsidy system, he said, “with its taper rates, caps and income tests, effectively locks tens of thousands of women out of working full‑time because the marginal cost of increasing their days of work just isn’t worth it.”

“Female workforce participation took a hit in March and has been slow to recover,” Mr Cherry said, noting the most recent data which shows that paid hours worked by women have fallen by 11.5 per cent compared to 7.5 per cent for men. 

“Australia simply can’t afford anyone to have a child care system that discourages any of our productive workers from working as much as they choose” he continued, adding that it has become “an economic necessity” to fix it.